Stock Market Trends – Don’t Fight the trend!

The stock market trend has been up in the U.S ever since the 2009 low.

During this period of time it was rare to hear anyone suggest shorting the market. Price action was smooth, impulsive and strong.

Why would you contemplate fighting it?

The question now; are we are entering a new bear market phase?

2018 has seen price struggling within a wider range. Will these moves prove to be corrective? Part of a major top?

It’s not yet clear.

Either way, we didn’t fight the moves on the way up, so we need to maintain the same approach on the way down.

Most people are more comfortable trading long rather than short. So as trends change, this is when traders often dig their heels in and resist what is unfolding before them.

Markets go up, and markets go down. Yet as trend followers we need to keep the same philosophy for both. And that is to not fight the trend!

We all love rising markets as they are easier to trade than bear markets. Yet when we see the DJIA go up 500 points one day then down 500 the next, this is not the behaviour of a bull market.

So now that we know we are no longer in an uptrend, there is only one thing we need to do, and that is to get out of the way.

We didn’t fight the trend on the way up so we need to learn not to fight it on the way down. And if you still have some open long positions left, your risk management will take care of things if conditions continue to worsen.

Many sectors have imploded at different stages throughout 2018. As for U.S tech stocks, it’s been a case of the bigger they are, the harder they fall.

Names like Alphabet, Netflix, Facebook, Amazon and Apple were all the rage 6 months ago tagging all time highs.

They have since dropped anywhere from 20% – 40% with no indications yet that lows are in. (remember this article was written in 2018. In 2020 the story is very different…)

The message is simple. Don’t fight market trends. They are battles you are never going to win.