Daily Traders Edge

Opinion: How to protect yourself as this bull market fizzles out – MarketWatch

May 11
14:23 2016

The 50,000-foot view of the bull market reveals that it’s in the latter stages. While that may appear obvious to some investors, what isn’t so clear is how an active speculator manages risk.

Last week’s column noted the big picture of “… trends and accumulation/distribution in the averages, market momentum, and the identity and action of the leading stocks.”

This is all an active market operator need concern himself with to stay on the right side of the market. By contrast, there is no place for prediction or personal opinion. Using a crystal ball to put precious capital on the line can be a fool’s errand.

First, intermediate-term direction, while weakening, remains up. This is the key time frame for momentum-based speculation. Whether or not the long-term trend (several months to years) is down is largely immaterial to a speculator. Unless he latches on to an outstanding market leader early in its move, he is generally not holding a winner for longer than several weeks to several months — the definition of the intermediate term.

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