Happy Friday, traders…

Ben here.

Today, I’m gonna let you in on a priceless secret and show you exactly what makes stock prices go up (or down).

I’ve said it before and I’ll say it again — price action represents the collective emotions of the market participants in that name…

“The Cycle of Market Emojis” illustrates this perfectly…

Traders buy and sell stocks based on how they’re feeling.

These dynamics are apparent in all risk assets from options, to crypto, and even bonds. 

If you know what to look for, you can see the cycle of market emotions in both long-term and short-term charts.

And if you correctly identify the peaks and valleys of trader emotion, you can potentially weaponize those moves to your advantage.

Take Jack Kellogg, for example…

Jack has made $13 million in trading profits ($8 million in two years)*, and it all started when he identified the fear and greed cycle happening during the pandemic market.

Now, for the first time in years, Jack has identified another cycle of market psychology — one that could lead to his Next Big Trade…

Jack knows that understanding the cycle of stock market psychology is essential for any trader. 

This cycle can be broken down into eleven distinct emotional stages. Let’s break them down…

Optimism

The cycle of market psychology typically begins with optimism, where traders feel confident about the future. 

This positivity is often caused by favorable economic indicators, innovative technologies (like AI), or new leadership within key companies. 

As stocks rise, this optimism reinforces the belief that the market will continue to perform well.

Euphoria

Following optimism, euphoria sets in. 

During this stage, the prices of stocks skyrocket as more traders pile in, hoping not to miss out on the rising profits. 

Valuations reach extremely high levels, often disconnected from the underlying economic fundamentals. 

Sound familiar? Think about the market of late 2021…

That was the point at which traders started saying the famous phrase “Stocks only go up…”

Complacency

Once the heights of euphoria are reached, complacency often takes over. 

Traders become overly confident in their returns, believing that minor dips are just temporary setbacks. 

This false sense of security can lead many to ignore warning signs of a potential downturn.

Confirmation bias, overtrading, and revenge trading often come to rear their ugly heads during the complacency period. 

Then, the charts begin to roll over to the downside…

Anxiety

As the market begins to falter, anxiety creeps in. 

Traders start to worry but still hold on to their stocks, hoping that the market will rebound as it has in the past. 

This stage is marked by increased volatility as traders begin to react to any negative news.

Denial

Following anxiety, denial sets in. 

Even as the market continues to drop, many traders refuse to believe they are actually losing money. 

They maintain that the downturn is just a correction, a normal part of market cycles, not something that will affect them long-term.

“Holders and hopers” become the norm as denial dominates market psychology. 

Fear

As the market decline continues, fear finally takes hold. 

Traders start realizing that the loss is real and not just a temporary dip. 

This realization often leads to a rush to sell off holdings to prevent further losses, exacerbating the market’s fall.

Imagine a burning building with everyone running for a single emergency exit door…

Panic

When fear escalates, utter panic ensues. 

This is the stage of irrational “panic selling” — and a moment of supreme opportunity for those who are prepared. 

The fear of losing everything overtakes rational decision-making, and stocks are sold blindly. 

This panic selling can lead to significant market crashes — and major discounts on great names.

Anger

Panic leads to anger and frustration…

Traders are upset at the market, brokers, analysts, and sometimes even themselves for their losses and the financial pain they are experiencing. 

They’ll begin to make excuses, saying, “The market is manipulated” (a.k.a. “This stock didn’t go in the direction I wanted it to.”)

This anger can hinder rational decision-making and lead to hasty decisions.

Depression

After anger, depression sets in. 

Traders may feel hopeless about recovering their losses. 

The market sentiment is decimated, and interest in trading diminishes, which can lead to decreased market volumes.

These are the “blood in the streets” moments that the Jack Kelloggs of the world patiently wait for. 

Hope

However, after the darkest stages, hope finally emerges. 

Some traders start to see opportunities in buying stocks at low prices, believing that the market will eventually recover. 

This buying can help stabilize the market and is often supported by positive changes in economic indicators.

Unsurprisingly, this is one of the best times to buy any risk asset — when the negative emotions have been flushed out and the market psychology is just beginning to curl back upwards.

Relief

Finally, relief washes over the market as it begins to recover. 

Traders who bought during the depression stage start seeing profits, starting a new cycle of FOMO as more join in to capitalize on the upward trend. 

This relief reinforces the initial stage of optimism, and the cycle begins anew.

Understanding these stages is crucial for traders, as they can help you understand why a chart is going up (or down) at a particular point in the cycle.

Again, you can apply this cycle to both long-term charts of the overall stock market and intraday charts of individual stocks. 

Recognizing the emotional state of market participants can help you determine when to buy or sell. 

By acknowledging that much of the stock market is driven by collective human emotions, you can better navigate through its highs and lows.

Now, before we head out for the weekend, let’s look at…

💰The Biggest Smart-Money Bets of the Day💰

• $2.08 million bullish bet on PDD 05/31/2024 $140 calls @ $5.20 avg. (seen on 5/2)

• $2.07 million bullish bet on KWEB 10/18/2024 $32 calls @ $2.03 avg. (seen on 5/2)

• $1.98 million bullish bet on AMD 07/19/2024 $170 calls @ $3.95 avg. (seen on 5/2)

Have a great weekend,

Ben Sturgill

P.S. This is your ONLY CHANCE to act on Jack Kellogg’s Next Big Trade… 

Once this rare profit cycle begins, there’s no going back.

It’s why Jack’s discussing this next big trade, and giving away a second trade idea Thursday night, for FREE.

Jack’s top 28 trades have ALL generated 100% or higher — with 12 soaring over 250%, and 4 exploding beyond 600%.*

And the next one just might be Jack’s best trade ever…

Don’t miss it — CLICK HERE NOW BEFORE IT’S TOO LATE.

*Past performance does not indicate future results