Market Trends: Focus on Fact And Not Fiction Tactical Investor
Market Trends: Focus on Fact And Not Fiction

Market Trends: Focus on Fact And Not Fiction

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Market Trends

 

Market Trends

There is no doubt that the markets are going through a difficult patch and this is not something new, though when it happens, it feels like it’s a brand new event and the first thing that crops to mind is the word “panic” because the experts are claiming it is different this time. If they knew what they were talking about, they would talk less and do more; being a bear is dangerous, for in the long run markets always trend higher.

Market Trends: Focus on Fact And Not Fiction

Now try to spot the great depression, black Monday.etc.  Every one of this end of the world events proved to be a buying opportunity, and that includes the notorious crash of 2008, which proved to the mother of all buying opportunities. If you look at all those “end of the world events” closely, they are blips in an otherwise massive upward trend.

There are always going to be days, weeks and sometimes months when the markets are down, but ultimately the market has trended in one direction and that is “up”. Massive fortunes were made by viewing these disaster type events through a bullish lens.  We also have Mass Psychology and the Trend Indicator on our side, both of which indicate that this downtrend at most could turn out be the backbreaking correction we spoke of recently. Every Bull Market experiences at least one and 90% of the traders falsely assume that this event marks the beginning of an extended bearish trend.

Market Trends: Focus on Fact And Not Fiction

Let’s take one major event that most remember, the Great Recession. Even if you mistimed your entry into the market and started to open long positions well before the Dow had bottomed, you would be sitting on massive gains today.

Panic based selling should, therefore, be viewed through a bullish lens, especially now that we are in the era of forever QE and most importantly remember that the masses were not euphoric when this sell-off started.

There is a time to sell, and that time arises when the masses are in a state of ecstasy. When the markets sell-off, it means that there are going to be plenty of opportunities, so instead of panicking, one should build a list of stocks that they always wanted to purchase.

The markets always return to the mean and hence the saying the greater the deviation from the mean the better the opportunity. History clearly illustrates that ultimately, the market trends in one direction only (up).

Articles of interest:

Technical Analysis

Why Mechanical and Technical Analysis Systems Fail

The Limitations of Trend Lines

Contrarian Investment Guidelines

Inductive Versus Deductive reasoning

Mass Psychology Introduction

Portfolio Management Suggestions