if there is no demand we can't clear off our stocks, so why do stock prices fall when there's heavy selling ? the buying at such time should nullify the strength of bears.
Think about it, the market is nett long. Basically only a small percentage of the market cap is short. Of course I am talking of stocks not futures. If the market goes up the only people who suffer are the shorts and those who have no exposure. Half the bears are people who own no stocks. So when it goes down they feel vindicated in not participating in the "risky" market.
Stocks go down not because there are more Sellers than Buyers !! There is the same amount of Sellers to Buyers when there is a major selloff. Its just the intensity of Selling is so much greater than the intensity of Buying. And demand is very very low compared to supply. So Buyers will come in and buy, but only at much lower prices. Thats why it plummets !!
You have to look at the business side of the Brokerage business. Most of the PUBLIC is long-buy orientated because they are conditioned to buy mutual funds, ipos, and equity offerings from sell side firms. Plus, historically, step back look at a chart of the Dow from say 1950 ? to now. Until 2000, the chart looks like a ski slope. Very Bullish. Hard to change what has worked for 30-40 years for many long term investors.
30 to 40 years? try the HISTORY of the US equity market there has NEVER been a 20 yr period in history where dollar cost averaging (long obviously) into the indexes has not resulted in a positive return. in most cases, a pretty good positive return that trumped most other asset classes. otoh, there has never been a 20 yr history in the stock market where DCA'ing in SHORT would have given positive returns the market is biased up because our economy grows wealth. it's really that simple. i love to short (futures). do it all the time. but that is not a strategy for most investors. it's a trading strategy sometimes.
In a rising market the transactions tend to occur on the asks; in a falling market the transactions tend to occur on the bids. Hence, in a rising market the ask retreats (upwards), in a falling market the bid retreats downwards.
i didn't say "index fund" try to keep up. index funds are a proxy for "the market" you can't pick exactly what stocks investors would have chosen, but using the indexes (broad based) as a proxy for "the market" i repeat there has never been a 20 yr period in HISTORY where dca'ing into stocks did not return positive. in most 20 yr periods it was in the upper 2 quintiles of all common asset classes why? well, because the US economy grows wealth, and DCA'ing is a great method for the average investor. it removes emotion, it buys more shares when stuff is cheap, taking advantage of means reversion instead of what most traders do - which is buying when stuff is up (chasing) and selling when its down. most traders lose money most investors do quite well fwiw, i am both. i LOVE trading, and i trade index futures for a living. however, i also invest. and i have one investment account that is PURE DCA. i simply buy the wilshire every month. no brains involved