|Dot Com Aftermath|
I invite you to study the first two charts very closely to see if you can identify something that would uniquely indicate a bottom in the market. Once you have done that, take a look at the current chart to the left. Do you see that same indication in the third chart after 2009, also?
The answer would be yes. It occurs when the 50-day moving average crosses the 200-day moving average from below, and the trend in the price candles is rising. (I have to add the last part about the rising price candles as the 50-day did cross the 200-day for a three week period in April of 2002, and that, clearly, was not a bottom). We also saw it, again, in October of 2010.
Here we have two major bottoms in the past decade, or so. It has been my contention that once the price candles drop through the 200-day moving average, we should stop out of our long positions until the market has bottomed. Yet we are told there is no telling when to get back into the market, or that we are likely to get in at the wrong time and out at a worse time.
Whether the bottom is the reversal from bear market to bull market, or if it is the bottom of a correction, the likes of which we experienced in 2010, it is a reliable and tradable indicator. Now you know what to look for before putting new money at risk in these volatile markets.
Are you convinced?