Mid 2008 - The markets are down 21 per cent from their peak and yet the terms 'Credit Crunch' and 'Global Financial Crisis' do not even exist yet in the public eye. Investors are hopeful that the markets will bounce back. This hope is portrayed in the press too by optimistic writers who also have money invested and by fund managers who have an interest in talking the market up.
October 2008 - Hope turns to pure fear. This is where the panic selling kicks in. This is where mums and dads start closing their pension funds for massive losses. This is where overleveraged and overexposed Wall Street bankers start jumping from windows. This is where the overconfident stock investors from late 2007 start sprucing up their CV and looking for a day job.
Early 2009 - Anger is the overriding emotion. Angry at bankers, at CEOs, at the government for bailing some companies out and for not bailing others out. We are even angry at the markets and at ourselves for not seeing this coming. It is so obvious in hindsight. Now we have underconfidence on a scale unprecedented to most, yet it existed as recently as the early 2000's as tech stocks guided markets lower.
Mid 2009 - As the markets start to turn the corner and rise, resentment stops those who lost money from getting back into the markets. They are still mad, still hurting and they are either broke or just not silly enough to make that same mistake again.
2011 - The market tests highs not seen since 2008. Yet while company profits improve and the economy shows very minor glimmers of hope, it is still grim out there and the pain of three years earlier is still too fresh for most. This market move cannot possibly persist right? The press is overwhelmingly bearish. The markets continue to rise. Who is buying? Smart investors, those who make decisions based on what is actually happening, not what they think should be happening.
2013 - Stock markets around the world hit new all-time highs, breaking 2007 levels. Those who were hurt in 2008 remain underconfident, resentful, angry and pessimistic. But there is a new wave of investors and buyers, there has to be... the markets have risen now for five straight years. Why is no one noticing? When will the public join, optimism return and the press realise just how strong this bull market is?
2014 - Here we go! As the bull run enters its sixth year, people start to take notice on a larger scale. The inexperienced are finally realising there is a party going on and they are the last to be invited but they must join. Optimism abounds, interest rates are rising or predicted to start rising in most major economies. Perhaps we are not quite at the overconfidence levels yet, but those who understand how markets move, are watching very closely for what comes next. Be it next week or next year, it always comes eventually.
Sometime in 2015 or beyond - At some point in the future, as certain as day turns into night, optimism becomes overconfidence which turns to greed. Everyone joins the party. Everybody is a stock investor. When everyone is buying, who is left to buy? And what happens next? You guessed it... hope, then fear, panic, anger and then resentment. The cycle continues and all the while, those who don't realise the mistakes they are making think they are following the market but actually they are unknowingly a part of predictable patterns of human nature.
Markets rise and markets fall because they are driven by human emotion. While the scenario above is over a long term, these same patterns exist on an hourly, daily and weekly basis and those who are savvy enough to recognise them, are also savvy enough to take advantage of them.
For those who think I too might be a hindsight trader check out this clip of me analysing the market, published to YouTube in May 2009.
App users: Tap here to view Nick's youtube video
I talk about the psychology of the market and the bullish signs coming into the market, while the world was still in the depths of despair. To quote myself near the end of the video "you will see the signs in the charts, before you see the signs in the newspapers" and "6th May 2009, that is my prediction, I think the markets will continue higher from here and lead the economy".
I have been publicly bullish ever since and only now; the majority are starting to finally forget the bear market and agree with the bulls. It might or might not be anytime soon but we know what always comes next... "when everyone is buying, who is left to buy"?
My trading team and I put out videos for the public every week and assess the markets in a similar fashion to the video above. The only differences are, HD technology has improved the viewer experience considerably and most importantly we are talking about the markets in 2014 and what is most likely to happen in the future, not what has happened in the past.
Nick McDonald is a New Zealander teaching everyday people how to trade the worlds markets via his company Trade With Precision. 
