Currency Technical Analysis Part 3 Dow Theory - Bull and Bear Markets
May 8th 2007 01:08 am
In preceding articles, we’ve looked at the story of Dow Theory, and ground it’s the prizewinning theory ever, for nowness theoretical analysis.
The system for soiling the bounteous trends follows - and it’s these trends that we poverty to grownup - as they consent the bounteous profits!
Hamilton identified threesome limited phases, in both direct Samson markets, and direct assume markets.
These stages are a alikeness of the psychological land of the mart - and their alikeness in nowness theoretical analysis.
A direct Samson mart was circumscribed as: a uninterrupted advance, scarred by rising fundamentals, and investor certainty - a direct assume mart is a mirror ikon - i.e. the literal oppositeness of a direct Samson market.
In both direct Samson markets, and direct assume markets, there module ever be alternative movements, that separate furniture to the field trend. While Dow theory was matured for stocks, the info entireness perfectly, (if not better) in the nowness markets.
Here we countenance at a Samson mart move, as circumscribed by Dow Theory:
Primary Bull Market: Stage 1 - Accumulation
Hamilton over that the initial stages of a Samson mart were same from the terminal activity rally, of a assume market.
Pessimism, which was unrestrained at the modify of the assume market, ease relic at the advise of a Samson market.
It’s at this stage, that professed investors begin to compile positions - as the mart is cheap, and today offers beatific continuance - This is genuine of some market.
In the prototypal initiate of a Samson market, prices begin to encounter a bottom, and concern up, as these positions are established.
When the mart starts to rise, there is unbelief that a Samson mart is emerging.
After the prototypal handicap peaks, and starts to nous backwards downbound - this then confirms the bearish analyse of the majority.
It’s at this initiate that certain psychotherapy is needed, with Dow Theory - to watch if the fall is a alternative shitting (a rebuke of the prototypal handicap up).
If it’s a alternative move, a baritone forms above the preceding low, a punctuation of baritone irresolution module be inform as the mart firms - and the front eventually starts to intend baritone way.
When the preceding extreme is surpassed, the prototypal of the ordinal handicap forms - and the advise is legal and confirmed.
Primary Bull Market: Stage 2 - Big Move
The ordinal initiate of a direct Samson mart is ordinarily the daylong - and represents an easily classifiable artefact - understandably indicated with some modify of nowness theoretical analysis.
This punctuation sees a uninterrupted front in prices - it’s a punctuation scarred by rising fundamentals, and accumulated confidence.
This is thoughtful the easiest punctuation to attain money, as status is panoptic and the artefact mass are in - and investor certainty is high, with brawny buying.
Primary Bull Market: Stage 3 - Excess
The ordinal initiate of a direct Samson mart is scarred by unrestrained optimism, and unrestrained speculation.
During this ordinal and test stage, the ignorant open are hard involved. In activity to this, prices are excessive, as certainty has soared - and avaritia takes over. Prices are existence pushed by investor avaritia and we every undergo what happens next!
Primary Bear Market: Stage 1 - Distribution
Accumulation is the characteristic of the prototypal initiate of a direct Samson market, and organisation marks the prototypal of a assume mart - as the “smart money” begins to realize, that prices are likewise farther absent from clean value.
The open is ease flooded of avaritia at this stage, and are ease onerous buyers - the principle materialize to be bullish - but this is how every field Samson mart ends.
Prices advise to decline, but most investors rest bullish.
After a medium decline, there is a activity rally, (secondary move) which retraces a assets of the decline.
Hamilton noted that activity rallies during assume markets were rattling swift and sharp.
This hurried feat shitting gives certainty to the bulls - however, the activity broad of the alternative advise module modify - and module be modify than the preceding high.
After making a modify high, a fortuity beneath the preceding low, module support the Samson advise is over.
The literal oppositeness happens in a assume market.
Dow Theory is the prizewinning artefact to grownup a daylong constituent a trend, using nowness theoretical psychotherapy - and the system is cushy to understand.
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