When i think secular bear market in equities, Japan's Nikkei comes to my mind. So i decided to do a case study going back to 1987 and study how big and how long these secular bear market rallies last. A couple of days ago i made a post called Have An Open Mind. I did this post because i felt like a lot of new traders were just longing FAZ and SKF and holding on to their to positions as if financials and the market will drop after every small rally and easy money is made without using any risk management. That is clearly not the case! Now, please do not get me wrong, i am bearish longer term on equities and anyone who knows me well, knows that i love shorting and the high volatility that is associated with bear markets but right now this rally needs to be respected. Now, this rally could poop out come monday morning, no one knows that for sure. Best thing to do is trade what the charts are saying and good USE RISK MANAGEMENT in ALL your trading decisions whether they be bullish or bearish. Don't just assume because that we are in a bear that stock prices drop after every 10% rally. Look, the hard core bears might eventually be right about the market breaking to new lows but will their account still be there to reap the rewards? Only proper use of stop losses and discipline will ensure that.
happy trading.
