Most people around here don't seem to understand the implications of this. When people start threads like "Everyone is buying, or everyone is selling..." it's obvious you don't "get it." So, prices are set by supply and demand... What sets supply and demand? Peoples emotions and their perceptions of the economy and markets. The best description of when prices are up is "People are feeling good about the markets today.", and when they are down is "People are not feeling optimistic today." Now, the really funny part about all this is that the main influence on peoples emotions in my opinion is price itself. When price starts going up everyone starts feeling better... And when everyone who is trading is relatively as optimistic as they can get for the amount of time in question price can go no higher... And starts to fall then everyone starts getting pessimistic again. Well, the 90% who don't make money, that is. The market is not a bank or savings account... It doesn't go up or down based upon a flow of money in/out. It goes up/down based upon changing supply/demand which is controlled by everyone emotions which are set by a variety of factors... The most important being price movement itself.
I believe you are correct in part. But for a long time price of us equities went up or down based on money flows into mutual funds. Perhaps there is still a strong correlation.
Tell that to the statistics that show mutual funds have had net withdrawals for 12 months straight. There are long term cycles in peoples emotional preceptions of the market. Just look at how many months it took for this market to reach full out euphoria before it topped out the last three times. Investors emotions are not tied to small price moves. They are only influenced by major ones. Thats why you really gotta worry after the market loses 250+ points from the long term highs... Those people have potential to flat out panic on downward price moves once they start seeing red.
The warren buffet strategy is one of the most solid strategies ever. Wait till there is fear and blood in the streets and accumulate the shares of solid companies. When there is euphoria and delusion distribute shares... I treat the intraday market the same way. Buy low/support on the fear spikes, and sell high on the euphoria spikes... And if there is a trend trade with the direction of trend but still trade off the spikes in emotion. (Highs, lows) within that trend. Daytrading the flow of emotions in the market intraday is QUITE a bit trickier than investing into crashes though... Even though I follow the same fundamental concept. There are a lot of key support/resistance levels and sometimes the markets are trending too strongly to do anything but go with trend. Sometimes the cycles in emotion are smaller or larger. Larger cycles in emotion are kind of predictable in that they occur on big news days and key technical points where the market is trying to change direction.
in that case you have Fed policy causes massive wall street bank inflows through free money re inflate the banks balance sheet policies.
my opinion is you can trade small trends intra day reading price action, anyone day trading really doesnt have to worry about anything except support/resistance and price action.
you certainly didn't make it any clearer..how is supply/demand 'constructed' ? what's the mechanics behind it? what strategies are being implemented? `what kind of impact do computer algoes have on current price? what's the nature of the demand/supply, where is the retail trader in all this sauce?? etc,etc,etc.. you explained dick as far as I'm concerned.. regards