Registered: Jan 2012
01-30-12 06:37 PM
Correct. What you're referring to basically is sentiment. Think of the dynamic / price action of a 'crash.' In an arbitrary and simplified example, everyone has drank the Kool-Aid and now sitting long. Now everyone sits around and looks at each other as there is no more capital left to buy with or no one else left to join the party and someone decides to head for the exit. Enough leave, causing prices to come in more, and some panic starts (remember, there are always those who have bought at or near the top so they're usually panicky and nervous). They head for the exits along with those that just want to keep profits and the whole thing really unravels, especially when there are only so many exits with so much capacity and no matter how good the news is, they still want out.
Look at some of the basic principles involved:
1 - price had to have come up first (probability of prices falling when they're already depressed is unlikely - think Feb / Mar 2009)
2 - there lack of will or abiltiy of the big player(s) to keep price moving up
3 - extreme sentiment - the pool of greater fools had finally run out