In financial markets there are times when one needs to be aggressive and other times, when one should allow the market to show its path. We are currently at one of these junctures, where my Market Analysis Matrix is painted like a rainbow. Therefore, I have decided to take this opportunity to observe the first 10 days of Muharram and to study for exams.
With contrasting signals abound, this is a very interesting time for the stock market. Market trend at all time frames is up, but the sentiment is pretty bullish indicating a decline. This confusion is amplified by unclear pattern of the recent, not so strong, rally, coupled with near-term cycles turn dates. Therefore, one should allow the market either to pull back or to start a strong rally, before jumping in.
Regular blog updates will continue after December 18, 2010.
In the mean time, if I do get some time and see some interesting development, I will write a quick post.
Note: Always trade alongside the major trend of the market. Mean reversion is a common aspect of different markets and also life i.e. anything which goes up must come down. But coming down does not mean a new bear market nor does it mean a personal life crisis. It is just a pause before we climb the next few stairs in our quest to destination.
In this regard, the most important question is, "How to differentiate between a 'Mean Reversion' and a new 'Bear Market'"?
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