One of the most respected technical analysts out there, I am talking about Louise Yamada, is talking about the technical situation in the markets.
You all know I am not in the predicting business. Still, making these kind of predictions, or if you prefer, thinking about potential targets technical analysis suggests, is very important. You simply need to understand that done properly, this ‘prediction’ thing is not at all about being right. It’s like a road map you look at. If price action supports your analysis, you stick to what your analysis implies. If price action doesn’t confirm what you think should happen, you adapt. That means you re-assess the new situation and you devise a new road map or plan of action so to speak.
Price not confirming your assumptions is best described as ‘price violating your validity point’. When you enter a trade your job is to define your stop loss level. Ideally a stop loss should be placed below your validity point. In plain English: When price breaches a certain predefined level the reason why you entered the trade is not valid anymore. That’s where you exit the trade.
That being said, almost everything I look at tells me to be extremely cautious. Is this a bear market? I don’t know. Nobody does. But odds are very high. As a technical trader that’s all I am interested in. Price would need to move up much higher in order to invalidate the bear market scenario.
So what are you supposed to do? The best piece of advice I can give is to stay in cash until the market validates or invalidates your assumptions. Wait for confirmation of a new trend. Once confirmed, you start building positions aligning yourself with that new prevailing primary trend. If this technical mess intensifies, this will be huge and there will be plenty of time to profit from that new big trend. I’ve repeated this ad nauseam, but it is important:
There is absolutely no need to rush things. Stay calm and focused.
Here are my website search results if you are interested in more videos and info on Louise Yamada.
Update: I originally embedded the wrong video as I was watching older Louise Yamada interviews…
I changed the text and the headline accordingly.
Transparency is an empty buzzword. Honesty is demonstrated over time through your dealings with others.
My public list with all my charts can be viewed here:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2791469
Buenas noches!