Fear tends to manifest itself much more quickly than greed, so volatile markets tend to be on the downside. In up markets, volatility tends to gradually decline.
Sentiment: NEGATIVE
During periods of extreme fear or greed, you don't have the proper balance between those two to generate market efficiency and you get extremes in behavior.
People often panic when the markets go down and sell off their stocks - but then they aren't in the game when the markets are doing well.
It's only when the markets are perceived to have exhausted themselves on the downside that they turn. Trying to prevent them from going down just merely prolongs the agony.
Greed is normally balanced by fear.
Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed.
If you're saving for the long run, it's actually a good thing when the market is down because the more shares you have, the more you can potentially make when markets rise. And over time - decades, not months - the markets rise more than they fall.
What we need to understand is, one, that there are market failures; and two, that there are things like asset bubbles and irrational exuberance. There are periods of booms, bubbles, and manias. These things, if left to themselves, can lead to crashes, to busts, to panics.
Fear, greed and hope have destroyed more portfolio value than any recession or depression we have ever been through.
Fear and greed are potent motivators. When both of these forces push in the same direction, virtually no human being can resist.
You don't want too much fear in a market, because people will be blinded to some very good buying opportunities. You don't want too much complacency because people will be blinded to some risk.