It's not easy to spot a change in trend. For a bull rally, the challenging task is trying to determine if dips will be bought and support levels hold. As we have seen recently, the biggest rallies occur within bear markets. And yes, this is still a bear market, with good rallies to entice even the most timid of traders and investors.
While many are trying to pick their spots to venture a buy the latest hot movers, they are cautious and nervous. Makes sense, and buying some Amazon ( AMZN) , Tesla ( TSLA) or Chipotle ( CMG) right now after their huge runs this quarter would be tempting. But who wants to be getting in when the rest of the crowd is exiting? The winds of change can be very notable and save you from getting burned -- just look for them.
Sentiment is always an arbitrary indicator. It relies on history, behavior, contrarian stance and some delicate timing. We don't often see the boat tilted to one side, but that is often a sign of too much sentiment, bullish or bearish. Bull/bear indicators -- such as the Citigroup index and the Investor's Intelligence index are some good indicators to determine if the boat is full.
Lately the put/call ratio ticked down to all-time lows. That is a tremendous contrarian indicator, when it's too low there are too many calls being bought -- hence too much bullishness. On the other hand, when the put/call ratio is elevated and ticks over a ratio of 1:1, too much fear is present and a bottom is probably at hand.
New highs and lows is one of the more reliable long-term indicators. Is the rally healthy or not? Back in September 2018 we saw this indicator breaking down just as the indexes were making all time highs. The relationship is strong, but when they diverge, look out. Price action often follows this indicator down a dark path, and that happened just a few short months later when the markets were clobbered in December 2018.
Follow these trusted indicators and they will tell you if a trend has changed. You won't want to be left behind.
Thursday's massive loss was one for the record books. Yet, we don't make money-breaking records, we make money following trends and patterns. With some of the most reliable indicators flashing bearish signals, and then price/volume weighing in to agree, we have to believe more downside is in our future. What to do? Sit on your hands, wait for prices to stop going down and then start picking.
"follow" - Google News
June 15, 2020 at 05:00PM
https://ift.tt/2zwkM66
Trends Have Signposts: Follow Them - RealMoney - TheStreet
"follow" - Google News
https://ift.tt/35pbZ1k
https://ift.tt/35rGyU8
Bagikan Berita Ini
0 Response to "Trends Have Signposts: Follow Them - RealMoney - TheStreet"
Post a Comment