i found this article which effectively summarises the points i made over the last 2 posts. We are still in the bear market. Fundamentally, we do not have any positive news. As such, i urge all to take profits first.
Not all, but 1/2 of it.
At least that is what i would do to be conservative. Simply because, paper profit is not profit till the position is closed.
Time To Take Some Profits
The market may reach its mid-term peak next week. After that we should prepare for the worst.
Both short-term and mid-term are overbought
The market is now overbought in the short and medium term. In the short term, the Fast Stochastic (arrow 1) is very overbought at 97.42. In the medium term, the Short WI (arrow 2) is also peaking at 85.69. But the momentum is still very strong, which is a good news.
With such a strong momentum, the market can still be bullish for a couple more days.
Once the Short WI crosses down, it will be a signal that the mid-term rebound is over. What comes after that will be a mid-term pullback.
Bear in mind that we are still in a bear market. A mid-term pullback can mean another round of sell-off, bringing the Index below the recent low. I’m talking about to levels below 2500!
Will that happen? It’s hard to say. We’ve got a bullish news from our long-term indicator. I’ll discuss it later.
But if you are sitting on profits, there is no harm being prudent.
You can start to take some profits early next week or you can take profit only when the Short WI crosses down.
You may want to keep some exposure, perhaps 50% of your fund, in the market, since there is a weak sign that the bear run may have ended.
One good news from our long-term indicator
We use 4 indicators to track the long-term movement of the stock market, namely the 100-day SMA, 200-day SMA, Long WI and MACD(200,100).
The good news comes from the Long WI, which has now crossed up (arrow 3). This is a bullish signal to suggest that the bear run may have ended.
Can it be a false signal? Of course. That’s why I suggest that you take some profits now.
The Plan…
The plan now is to take some profits. I suggest that you keep only 50% of your fund in the market.
If the bear run hasn’t ended, we will see the Index fall below 2500 by the time the Short WI goes into the oversold region.
On the flip side, if the Long WI is right and the bear run is over, we will see the Index staying above 2500 by the time the Short WI is oversold. If that is the case, you can enter the market again and get ready to ride the new bull run.
There is a 3rd scenario, where the market is very bullish and the Short WI remains overbought for the next few weeks and the Index continues to surge. This scenario is quite slim. Even if that is the case, you still have 50% fund in the market to profit from the surge.
