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Bull Markets Roll, Bear Markets Spike

  
  Education
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bullbear-ASRThere is an old trader’s saying that “bull markets roll, but bear markets spike.” This comes from the characteristic nature of the price action.

When a market is in bull mode, the majority of participants are happy and content (as the vast majority of investors are “long only”). The bull market thus “rolls” along, like undulating waves of grain, as more bullish investment capital flows into the market and positions are added to.

When a market is in bear mode, however, the majority of participants are annoyed or upset (because, again, those willing to go short are relatively few, while all the world is comfortable being long). The result is much more of a rough, jagged, against-the-grain type profile, in which extended declines are interspersed with surprisingly vicious rallies of short duration.

These mini-rallies are made even more vicious by the forced activity of “short covering,” in which bearish traders caught napping get “squeezed” out of their positions by the fighting spirit of the bulls.

Lying in wait at the top of a salmon-rich waterfall, then, is akin to waiting for that “spike” to occur before putting out a new bearish line. How do you identify such an occurrence? Simple:

  • Wait for your intended market to confirm a new downtrend (or break key support).
  • Wait for a countertrend rally – one that takes prices higher, but does not “clear” the bearish trend.
  • Enter upon reasonable evidence that the countertrend rally (or spike) has run its course.

UK And US Among Top 5 Weekly Sovereign Deriskers

  
Analysis, Economy, Education, Forex
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The week’s biggest (sovereign) CDS movers have been released, and we have some new entrants in the most endangered species list. While by now nobody will be surprised that the UK is a consistent top 2 player (coming in this week with $319 million in net notional derisking, this making it the 8th week or so the country has made the top 3), only behind Italy and its $452 million in net notional, and just in front of last week’s #1 Brazil, the presence of the United States at #4 should be a little unsettling. It has been months since the US appeared in the top 5. And just like in the long gold case, the same types of existential questions once again arise when the interest in US CDS picks up: who gets to pay off your contracts in the case of an event of default? Elsewhere, the presence of Korea and Turkey (or Australia) in the top 10 should not come as too surprising. On the other end, short covering was violent in CDS of Spain, Hungary and Portugal – Europe’s newest lepers. Is the CDS community concerned the EU can actually pull out a rabbit out of the hat that actually works for once? Hardly. The top 10 reriskers also saw the inclusion of France and long-forgotten insolvent Greece.

Great NEWS :IMF to provide give €10 Billion to Greece

  
Analysis, Economy, Education
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The International Monetary Fund is looking at raising its share of Greece’s financial rescue package by €10bn ($13.2bn) amid fears that the planned €45bn bail-out will fail to prevent the country’s debt crisis from spiralling out of control.

Senior bankers and officials in Washington and Athens told the Financial Times that the IMF was in talks to increase its aid contribution by €10bn. The fund could make that sum available under a planned three-year loan, according to an Athens-based analyst familiar with the talks.

Investors and policy specialists said that expectations of the size of the three-year package in Washington policy circles had increased to at least €70bn. The EU has so far proposed to provide €30bn and the IMF €15bn. “The fund’s current ceiling for Greece is €25bn and the release of the extra amount is under discussion,” the analyst said. The IMF declined to comment on the size of the package.

Dear Readers & Traders ,We are again first in India to give this NEWS.And in afternoon or late by evening once this NEWS will be out.Then watch huge short covering across the Globe.

Technically Yours

ASR Team

Baroda ,India

3 Trading Wisdom Thoughts

  
  Education
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1) Focus on being profitable for the week – Individual trades may go against you and individual trading days can offer little opportunity. As a senior trader once explained to me, for the active trader, however, there are enough fresh opportunities in a week to make it reasonable to set a goal of being profitable for the week. You won’t reach your goal every single week, but the mere act of setting the goal keeps you focused. For example, you don’t want to lose so much money in a single day that you can’t make it back during the other days of the week. You also don’t want to lose so much money on a single trade that you can’t come back during the remainder of the day. When you really push yourself to be profitable every week, you don’t let individual days get away from you. And when you don’t let individual days get away from you, you start managing each trade carefully to ensure that your largest loss won’t exceed your largest gain. Time and again I’ve seen a consistent sign of progress among developing traders: they stop digging themselves into holes.
2) Take what the market gives you – Today I peeled out of several short positions after a spate of very negative TICK readings in the afternoon. I’ve learned that such concentrated selling often precedes nasty short-covering rallies. My S&P position hadn’t made as much profit as my NASDAQ and Russell positions, but the market doesn’t care about that. I took what the market gave me and started the week green. Did the market go down even further after I exited? Absolutely. As one experienced trader explained to me, when the market rewards your position right off the bat, you want to take something off the table. You might let a piece of your position ride if you have a longer-term opinion, but never give green a chance to become red. A winner that turns into a loser is a double loss. (more…)

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