Wisdom 2

-Feeling the markets reactions-

When price breaks down sharply like it just did, the market becomes very sentiment driven. Short sellers pile in and investors looking for an opportunity to get out on an price rally can stop a rallying market in its tracks. This creates the multiple rallies and subsequent sharper selloffs characteristic of a bear market.

In these situations, gauge the market’s reaction to good and bad news to measure investor resilience.

If bad news comes out and the market sticks around or goes higher, this is a sign of string resilience. If it the market drops or worse, if it reacts weakly or negatively to GOOD news, watch out and get out.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s