Understanding Market Emotion As China Fear Jumps

Published 03/21/2012, 02:30 AM
Updated 07/09/2023, 06:31 AM

The markets are trading lower today after worries on the Chinese economy surfaced once again. A Chinese slowdown has been long talked about but has had little effect on the massive rally in U.S. equities. The SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $140.00, -0.88 (-0.62%).

What is the reason for this shift in market action? Why does talk of a slowdown in China mean something while the last ten times it had no effect on the markets?

Simply put, human bullish emotion has reached a top. Think of the ocean and the tides coming in and going out. As emotion sways one way, it will ultimately reach its peak and slowly start to shift the other way. This is the motion of emotion. Based on the effect of the China news today, this shift has started.

The slight shift in market mentality can be seen in Apple Inc. (NASDAQ:AAPL). Over the last week, AAPL shares have had a tough time breaking through the $600 level. Today the stock is trading at $597.29, -3.81 (-0.63%).

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