Market Fluctuations - Will the Stock Market Crash Again?

Do you watch the business news? It can be depressing at times. CNBC has breaking news every few minutes and generally it isn't of the good kind. The economy is struggling.

We see it in the papers, the news, the radio and probably in your own life. Our personal investments have taken a beating over the last 5 years. IRAs and 401ks have been slashed though they have recovered over the last year. Personal credit card balances have jumped and savings have taken a hit.

Many insiders in the investment world recognize that the performance of the economy has a significant impact on the stock market. Profit and loss and cashflow will win out in the stock market eventually. Though experience tells us that it can take a while before equilibrium is restored.

Had you payed attention during 1999 or 2000 to a specific stock market prediction you could have avoided a significant drop in your retirement funds. Now that we are nearing the end of the year, prognosticators will be all over the airwaves talking about their stock market prediction. Always remember that they don't have a crystal ball.

Their prediction is based on experiences, a model and sometimes just a gut feeling. Knowing what their stock market prediction is based on can help you understand if it is going to be useful for you. No one truly believes you can predict the future. those experienced in the trading pits can make very educated guesses though. They use tools like technical analysis based on the past price movements and trading volume to determine the probability of the market moving in one direction.

It isn't rocket science but can give them a decided edge in the market. Take a commodity like gold for instance. It has had a significant price increase in the last couple of years. Many people think it won't be able to continue this dramatic increase. The foundation of this forecast is that gold is in a bubble and a decent economic recover.

Bubbles always tend to last longer than people expect they will. Trying to guess the end of a bubble can be dangerous. Now one really knows if gold will continue its price increase. Or if the economy will enter into a decent recovery or a double dip recession. But using a model based on those assumptions, you can develop a method for stock market prediction that is better than flipping a coin.

Many times that is enough to give you a decent edge. Commodities aren't the only thing in question. Many commodities have a direct influence in the stock market. Gold price can have a huge impact on a gold mining company's ability to make a profit. Those profits tend to dictate the share price of a stock. If you can generate increasing and steady profits, investors generally reward you with higher stock prices.

No matter whose stock market prediction you listen too, make sure you study it yourself. Make sense of their model before believing their conclusions. Stock market prediction can make you a lot wealthier but only if you pick the right one.