Why earnings are important:
Earnings of a company are extremely important for a company to be successful, especially for a long term. In a short term, it may not matter as much. The price of the stock over the long term have a direct correlation with the growth of the company's profit or earnings. People who have made money in the stock market usually bought companies that have done very well over time. It may to hard to believe but Wal-Mart was a small company with small profits. But now, they are the largest retail in the world  and making billions in profits. So was Amgen, Home Depot, Microsoft, Intel, Dell and so on.

It's true that companies go out of business for one reason or another; fraud in the case of Enron. So K-Mart went bankrupt. There are over nine thousand public companies out there. Guess what? Wal-Mart did very well, thank you. If you had put $10,000 into K-Mart 20 years ago and $10,000 in Wal-Mart, you would have basically lost the $10,000 on K-Mart but you would've made $790,000 on Wal-Mart. For every Enron or K-Mart out there, there are companies that do very well, like GE, Proctor & Gamble, Coca-Cola, Gilette or Johnson & Johnson.

In the long run, there is only one reason why stocks go up: Companies grow from small to large or go from doing poorly to doing well. Bottom line is if company do well, their stocks will too.

What are the Bulls and the Bears?
The Bulls - A bull market is when everything in the economy is great, people are finding jobs, GDP is growing, and stock prices as a whole are moving upward, although the rate at which those increases occur can vary widely from bull market to bull market. Things are just great and picking stocks during a bull market is easier because everything is going up. Bull markets cannot last forever though, and sometimes they can lead to dangerous situations if stocks become overvalued. If you believe that stocks will go up, you are called a "bull" and said to have a "bullish outlook." Well-known bull markets began in 1923, 1949, 1982, and 1990. Growth stocks usually do well in a bull market.

The Bears - A bear market is when the economy is bad, recession is looming, and stock prices are falling. Bear markets make it tough for investors to pick profitable stocks. Some people try to make money in this situation when stocks are falling using a technique called short selling. When you are pessimistic about the stock market and believe that stocks are going to drop, you are called a "bear" and said to have a "bearish outlook." The most recent bear market began in 2000. Blue chip value stocks usually do well in a bear market.

Chickens and Pigs - Chickens are afraid to lose anything. Their fear overrides their need to make profits and so they turn only to money-market securities or get out of the markets all together. While it's true that you should never invest into something over which you lose sleep, you are also guaranteed never to see any return if you avoid the market completely and never take any risk.

Pigs are high-risk investors looking for the one big score in a short period of time. Pigs buy on hot tips and invest in companies without doing their research. They get impatient, greedy, and emotional about their investments, and they are drawn to high-risk securities without putting in the proper time or money to learn about these investment vehicles. Professional traders love the pigs, as it's often from their losses that the bulls and bears reap their profits.

There are plenty of different investment styles and strategies out there. Even though the bulls and bears are constantly at odds, they both can make money with the changing cycles in the market. Even the chickens see some returns, though not a lot. The one loser in this picture is the pig. Make sure you don't get into the market before you are ready. You should never invest in anything you do not understand. There is an old stock market saying that goes: "Bulls make money, bears make money, but pigs just get slaughtered!"

Two main ways to analyze stocks:
Technical analysis - Technical analysts study trading histories to identify price trends in particular stocks, mutual funds, commodities, or options in specific market sectors or in the overall financial markets. They use their findings to predict probable, often short-term, trading patterns in the investments that they study. The speed (and advocates would say the accuracy) with which the analysts do their work depends on the development of increasingly sophisticated computer programs.

Fundamental analysis - Fundamental analysis is one of two primary methods for analyzing a stock's potential return. It involves assessing a corporation's financial history and current standing, including earnings, sales, and management, as well as the strength of the corporation's products or services in the marketplace. A fundamental analyst uses these details as well as the current state of the economy to assess whether the stock is likely to increase or decrease in value in the short- and long-term, and whether its current price is an accurate reflection of its value.

So, why do stock prices change? In short term horizon,  there could be many different reasons. Some believe that it isn't possible to predict how stocks will change in price while others think that by drawing charts and looking at past price movements, you can determine when to buy and sell. The only thing we do know as a certainty is that stocks are volatile and can change in price rapidly, and in the long run, stock price will mimic it's earnings.

**Very Much Highly Recommended Reading**

One Up On Wall Street Lynch was a portfolio manager who turned Fidelity Magellan Fund into largest and best performing fund in the world under his leadership from 1977 to 1990 with an average annual return of over 29 percent. This book teaches the basic but powerful way to pick great companies.  Peter Lynch has also written 2 excellent follow up books. Learn to Earn: Beginner's Guide to the Basics of Investing & Business and Beating the Street

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