Kinetic Trader

Picking Market Tops

Crazy times right now for investors as so much negative news out there and market keeps moving higher. Quantitative easing has become a household term now and everyone is assured that when the fed is buying then the market will go higher. The VIX (volatility indicator) is in the doldrums with little fear yet market keep holding up.

We’ve had a 15% move in the market in only a couple months with initial push being weak volume so people continue to talk about how its not sustainable,etc…..Anyways, there is lots of confusion out there and with the big macro news moving markets around and big Ben Bernake flooding market with liquidity, it is tough to understand to try to time a top in the market if you are bearish.

I agree that some data and some technical indicators haven’t been confirming this market but the biggest lesson every trader will learn hopefully sooner than later is to NOT FIGHT THE TREND. The market has shown minimal distribution and holding up well. I personally think it will crack to the downside but it is much easier and less painful in the pocketbook to just let the market show a change in trend before picking the top.

In fact the best summary of how NOT TO TRADE is summarized in this video below :

(there is some foul language so beware if you have your speakers on or you are watching this at work)

If you missed this move then be patient and wait for indication of move higher but market will eventually revert to a mean so best to keep new positions small until we see a pullback. If the market really cracks then the trend will change and we can react on the downside. Although, maybe with elections done everyone thinks a new bull market has begun. We will see …..

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