Panic or Profit? Your Choice . . .



vixpic2.jpgToday’s markets offer an emotional feast.

Where else can one zoom from Exaltation to Desperation within a two-week period?

And, this market emotional roller coaster formula has the same instructions as with a bottle of shampoo; ‘Shampoo, Rinse and Repeat’ or in the market’s case; Go Bullish, Get Bearish and . . . Repeat. Or perhaps, Be Optimistic, Get Pessimistic, Get Optimistic again. Round and round again.

The Volatility of the stock market has a methodical swing cycle lately of about two-weeks from one extreme to the other and, though they don’t always align with peaks or troughs, they do tend to stop ongoing micro-trends in their tracks and reverse trend direction on the short-term.

The first defense is to be aware of these swings in volatility or ‘Panic’ trading environments. These are represented on the chart with the upwards spikes.

sp500-bThose are times of extreme Pessimism.

If you know one of these ‘panic’ cycles is due, you can expect to see prices spike or drop sharply from their preceding trend.

Presently, we’re at the ‘Optimistic’ phase which, doesn’t align with expectations of the media which is promoting lower prices.

If their destination is lower, it appears that there will be pause along the way if these emotional cycles play a hand.

This would imply that we’ve made a bottom in the markets and almost to-the-day in alignment with the volatility cycles shown on the chart.

Knowledge is Power.

Take advantage of the emotional state of the market by observing & anticipating the emotional swings from laughter to tears.

The passionless observer is the better trader. Have no market expectation except for that of CHANGE.G.R. Harrison