How to know when Up Trend ends
One of our members asked if the current Up Trend is fundamentally sustainable. In other words, how do we know when this Up Trend will end?
Stock markets are only loosely coupled with economic conditions. By the time we read about economic or finance or political news, you can bet that insiders and big money already know. You can also bet that the news are mostly already factored into stock prices. So us small investors and traders have zero edge when we try to apply the news to our investments or trades.
The only way for us to survive in the market is to learn how to track Big Foot, or rather Big Money. Like Big Foot, Big Money leaves a trail of large imprints when they make some serious moves. And that is why we choose to monitor market internals.
In our experience, market internal indicators are like the footprints of Big Money. They come closest to accurately tracking the major moves of Big Money, especially for long term and intermediate term time frames.
As for tracking Up Trend, when you are investing in the long term time frame, your best bet is to assume that the market will go up. This is because the stock market is skewed in the bullish direction. Bear markets do come, and they are nasty, fast, and furious when they arrive. But they don’t last as long as bull markets. Sellers and short-sellers are in the minority. Most portfolios, big and small, are set up to buy. (You can’t sell short in your 401k, can you?)
So you can assume an Up Trend will last, until all market internal indicators start to shout “mega bearish divergence” under the hood, and keep shouting this message for a while.
When we detect that message, we will tell you to consider exiting the stock market and go to cash for the long term portfolios. Right now the Up Trend is still in play. So assume that stocks will go up in the long term until market internals tell us otherwise.
Intermediate and short term trades are different beasts. We will elaborate more on that below.
The rest of this article covers:
Table of support and resistance levels
Projections from market internals
Planning your trades
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