3/18/2012 Market seems immune to correction for now, well it will happen in future somehow...Read Now As we know, the rally started in late December 2011 is intact so far. All who missed the rally or prematurely exited the market are waiting for pullback. Remember, market likes to "penalize" maximum people. When everybody is expecting a pullback, market keeps going higher thereby causing more frustration. But how higher will this rally continue!!! Do we really care? In below BPNYA chart we can see how close we came in triggering our SELL signal (BPNYA crossing EMA[30] downwards). BUT we never got the signal, instead BPNYA is rising higher. This may continue for few more days before we get actual SELL signal. The more BPNYA goes higher from this point, more likely we will see increased volatility in the market and wild swings. At some point, market will correct but as we know it will do so when fewer people expects it. Below NYSE Index chart shows some interesting observation. What happens when index value touches those blue lines. Especially if it goes beyond those lines then we see how index snaps back between those lines. Those lines are called "Bollinger bands". This shows how high is the probability of a pullback. Remember:
We always say "probability", in other words "odds of winning" which indirectly means there are chances that it may not happen at that time. Hence timing is critical for success in stock market. No one can time the markets but as long as we can read the signs we can protect our capital as well as gains. In short, having a plan always works not just for stock market but also in life. What do we do with... 401K Investments: If you are already invested then wait for SELL signal. If you missed the rally or prematurely got out of market then wait for next BUY signal. ETF/Stocks Investments: You can continue to invest but be careful and use stop limits no matter what. Capital preservation must be our TOP priority... be alert and cautious. Comments are closed.
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