Market Sentiment Indicator: Trend Indicator is At the Top
Updated Sept 29, 2023
Our goal is to determine the Trend In advance of the Event; to illustrate this point, let’s look at real-time examples of the trend indicator in action. The red arrows in the charts are profit points for traders with short to medium trading time frames. We focus on the long and very long-term timelines but will always provide suggested exit points for investors with shorter horizons.
Blue arrows indicate buy signals based on the trend indicator, and red arrows indicate sell signals based on the trend indicator. As you will see from the numerous examples below, we are not looking to spot the ultimate bottom or top. In most cases, the signal turned bullish before a base was in place and bearish before a top was in place.
There is a saying in Wall Street that bears win sometimes, and Bulls win sometimes, but pigs always get slaughtered. The point we are trying to make here is that our goal is not to spot tops or bottoms or fixate on trend lines and worry about when the stock might or might not top or bottom. Our goal is to enjoy the ride up and or down until the signal changes, and that is it. With this strategy in place, investing is a highly pleasurable venture as one is in a position to identify market trends in advance.
We will start with FXI (iShares FTSE/Xinhua China 25 Index), one of the much larger ETFs. Even with this large ETF, you can see how beautifully and seamlessly the trend indicator works.
Market Sentiment Indicator: Not Trend Line Drawing
The trend indicator is not the same as Drawing Trend Lines.
If you were applying the principles of trend line investing, you would have waited for SOHU to break out above the black downtrend line (the breakout point indicated by the green arrow). However, the trend indicator turned bullish almost three years earlier and generated additional buy signals, as shown by the blue arrows. The trend indicator allows you to lock in significantly larger profits while focusing on the actual trend at hand instead of trading based on news or wrong perceptions.
“In 2011, an opportunity presented itself with an entry point around $32, offering a favourable position compared to waiting until 2014 when entry occurred at approximately $39.00-$40.00. The new blue arrows indicated that the strategic advantage extended to the ability to augment the position. For short-term traders, seizing profits aligned with the red arrows and re-entering positions based on subsequent blue arrows proved a viable approach.
Notably, precision in timing the exact market bottom or top wasn’t the primary focus. This nuanced strategy doesn’t adhere to pinpoint entries and exits. Instead, the Tactical Investor’s objective centers on leveraging Market Sentiment Indicators, such as the Trend Indicator. The aim is to enter when markets are oversold, sentiments are apprehensive, and conversely, exit when markets exhibit signs of overenthusiasm.”
Let’s take a look at two examples: SOHU and NTES.
In early 2012, an opportunity arose to initiate a position in SOHU, followed by continuous additions until 2015. Profits were strategically taken at points indicated by the red arrows. For those adhering to the trend line investments protocol, patience remains paramount as the waiting game continues. Notably, the strategy seldom aims for precise entries at market bottoms or tops; that’s not the primary objective. The focus is on entering when markets show bottoming signals and exiting when signs of a market top emerge.
Once again, we emphasize that a Tactical Investor doesn’t strive for exact timing at the market’s zenith. Any fortuitous timing at the actual top is attributed to chance. Tactical Investing revolves around entering when an asset class is disregarded or disliked by the crowd and the given asset trades in highly oversold ranges.
The first buy signal for the stock NTES was generated in late 2011, and you would have got in and out continuously till 2015; along the way, you would have profits as indicated by the red arrows. Again, we rarely got out towards the top or in towards the bottom, and that is perfectly okay with us.
With Vimpel Communications (VIP), the first buy signal was triggered in Nov 2014, followed by a second and much stronger buy signal in Feb 2015. Shortly after that, the stock took off, and we bailed out around 6.30; while we managed to get close to the top, this was more luck than planning.
Our goal is to get when the market starts to give indications of a top, and this usually means we get in a bit early and out a bit early, but we are not too worried about catching a few extra points. We aim to get in before the market takes off and out before it breaks down.
The Tactical Investor Trend Indicator: Ideal for Spotting Tops
“The Tactical Trend Indicator proves effective in identifying opportune entry points and pinpointing topping actions. For instance, FXE, a Euro proxy, initiated sell signals in August 2011 and has consistently generated them since. The strategy involved buying calls during the intervals marked by blue arrows. This dynamic approach provided ample opportunities for futures traders, equity players, and options enthusiasts to capitalize on the market’s downward movement, securing substantial profits.
Similar calls were made for Gold and the dollar in 2011. At that time, the strategy pivoted to a bullish stance on the dollar while adopting a bearish outlook on the Euro and Gold. Subscribers following these recommendations closed their positions in Silver bullion (with profits exceeding 1000%), Gold Bullion (700% plus), and Palladium bullion (approximately 800%). This underscores the Tactical Investor’s proficiency in navigating market trends for significant gains.”
“The Tactical Trend Indicator proved invaluable during the most substantial and controversial bull market in financial history. Its function doesn’t lie in precise market timing, a task often reserved for those with an appetite for pain and abundant time. Instead, this indicator focuses on navigating the market’s overall trend, ensuring that significant opportunities are not overlooked.
Despite notable volatility, especially after establishing the first position in 2009, any discomfort tends to be short-lived. Acclimating to the indicator’s operational nuances minimizes concern over short-term movements. Encountering a dip in the market after a buy signal triggers a proactive response – buying more. The mantra remains steadfast: as long as the trend is upward, more significant deviations present better buying opportunities.”
If you want more, look at the extensive list of our market calls.
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