Markets have always been known for factoring the worst and they always make their bottoms much before the worse actually happens. Two golden rules to time the markets.
1. Buying just a day after the worst news comes, is the best way to time markets, to make money.
But you should sell before the next worse news comes. You might be trapped, if a long series of worse news keeps coming, wait for the series to end, keep buying more. Markets will rise highly at the end, without any good news.
2. If market is waiting for a news, the move of the market will be independent of outcome of the news. However, if a news comes unexpectedly for which markets are not waiting, the outcome depends on the news.
People look for indicator like Volatility, supports, resistance but believe me all these just don't work. Above two rules will help you more than any support or resistance level will.
Today, the markets have made their bottoms in relation to the mortgage boom and its bust.
The recession will soon look like over, obviously lot of macroeconomic numbers are going to come out to show worst might not be over, but do not get worried markets are ready for a rally.
Now, people will soon forget about Subprime crisis. This looks like the end to me.
But now the problem has just started which will surface again a year later, i will call it bust of the US consumption boom. But forget that, go long with a lot of money till November we will not see any signs of this crisis. Go short on gold for some time.
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lost money in equities .. by going long for October but made some in crude .. by going short ..
ReplyDeleteoverall it was a zero sum game.
So .. the rule above doesn't work under all conditions.
September 30 was the wrong time to write that worst is over in relation to subprime crisis, but today (Oct 13) i can surely say so. I am always bad at timing the market, so above two rules do not work all the time.
ReplyDeleteI must write these two new rules for timing the market (exactly) are here :
1. No rules will work for timing the markets.
2. If you however found some rules, refer to rule 1.
Still short crude, long equities.