Amateur short sellers, having made their move too late, quickly follow the professionals’ lead. Floor traders, sensing the reversal, throw the weight of their buying behind the market. Thus, the rally is on. Obviously, such a phenomenon is not a forecast of a fundamental turn but merely a technical rebound in a market that has gone too far too fast.
It is invariably easier to call the end of a bear market rally than the beginning. Rhea described one of the best methods for identifying the top:
‘‘In such action the peak is frequently attained on a sudden increase in activity lasting a few days. It is usually impossible to pick the turn with any degree of precision; however if, after the high point has been attained, a further rally shows a definite diminution in activity, it is probable that an early resumption of the decline will occur.’’
Dullness following the peak of a bear market rally is a common danger sign. However, it is often confused by the average investor who fails to realize that the old adage, ‘‘Never sell a dull market,’’ does not apply when the primary trend is down. Dow was the first to recognize the implications of dullness.
In 1902, he wrote, ‘‘...the action of the market after dullness depends chiefly upon whether a bull or bear market is in progress. In a bull market dullness is generally followed by advances, in a bear market by declines.’’ He adds that, in bear markets, ‘‘...prices fall because values are falling, and dullness merely allows the fall in values to get ahead of the fall in prices.’’
Following a bear market rally, one Average often advances to a new high,but this may not be confirmed by the other Average. In such areas, dullnessoften occurs, after which both Averages sag below preceding decline points,and the primary downtrend is again resumed. Psychology during bear marketrallies seems to follow a fairly consistent pattern.‘‘
During secondary reactions in bear markets,’’ wrote Rhea, ‘‘it is a fairly uniform experience for traders and market experts to become very bullish. They are usually bearish about the time the upturn comes.’’
The converse holds true of the psychology that precedes a bear market rally. Here, boardroom ‘‘oracles’’ are gloomy, investment services are pointing out the advantages of bonds and defensive stocks, and neophytes are trying their hand at shorting. The bad news, which already has been discounted in the downward swing, is appearing on all sides. At such times, a bear rally is in the making.
mega.nz
STAGE 2 BMR TOWN
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40% SP500 ima earnings report ove nedelje...
moji long puts iz januara su samleveni, ali ih i dalje držim... mislim da ce biti nekog minimalnog profita... cash is KING kao i uvek...short the rip strategija najbolje funkcioniše u prvoj i trećoj fazi bear-a
u drugoj fazi bear-a, zakasneli bearovi su pojedeni živi, a onda svi misle da je bull market već počeo, i onda počinje limit down market - programirano je...bukvalno.
u četvrtoj fazi se kupuje decenijsko dno.
mega.nz
Veliko hvala @WifeyAlpha et al... ogroman izvor znanja u poslednjih godinu i po i kusur dana...