I think it must be human nature to fight the market. By that I mean play the low percentage bet or buck the odds (in this case I'm talking about trying to pick a top).
Now if you are in a casino you will get rewarded if the long shot hits with a sizable return on your original bet (not sizable enough for you to make money over the long haul though. Hey they don't build those casinos by letting gamblers win.) Not so in the stock market. The only reward for fighting the odds is usually to contribute money to smarter more seasoned traders.
Lets take a look at what's involved when you choose to fight the odds investing. Investors trying to pick the top are fighting not only the short term and intermediate term trend but possibly now the cyclical trend. Every time frame is against you. That means the odds are heavily skewed against you correctly spotting a top. Insistence on this strategy is most likely going to result in multiple loses. Sadly that's not a very good way to make money in the stock market. If one is taking big positions these multiple losses can do severe damage to ones account.
The safer course of action would be to either get aligned long with the trend of the market or just get out. Unfortunately traders seem to have this almost uncontrollable need to pick a top. Perhaps it's for boasting rights if they ever do get lucky enough to spot one. I really have no idea what the fascination is with spotting tops.
It seems like almost everyone is trying to pick a top right now whether it be in the stock market or the gold market.
For gold the secular bull market is not in question. It has been rising for 9 years. That means the odds favor that long is the correct position.
The stock market is a little more questionable. It is definitely in a secular bear market and has been since 2000, but the cyclical trend may have turned up. For stocks the short and intermediate trend is still unquestionably up, the only question is whether or not the cyclical trend has also turned. Since the 200 DMA is now sloping up and the 50 DMA has crossed above the 200 I'm going to assume that it has. That means there are only two correct positions, either long or out.
However since there is no question about the secular trend in gold I would think that would be a safer bet than trying to guess at the stock market.
4 weeks ago