Trade the Market Not the Economy?

Here’s what we know so far:

• The equity markets are still in a negative trend.
• Crude oil is still in a negative trend.
• Gold is in an erratic upward trend.
• The dollar is also in an erratic upward trend.

The market moves based on perception or, in other words, what people are feeling emotionally. On the other hand, the economy moves on fundamentals (think supply and demand).

To best trade the markets we must keep our emotions to the side. This is why I love technical analysis. While I stay up to date with the most important news, technical analysis allows us to block any negative notions running on our head.

Back to what we know…

The current trends we are experiencing have dug such a deep hole that there is still much to do before we are out of the woods, but that doesn’t mean these trends aren’t making any gains.

Stocks don’t just move up and down. For the most part, before any change in trend takes place we must bear through the sideways movement or consolidation. What this means is that we have to see the supports and resistance constantly be tested.

While this may seem like a bummer, making calculated plays off these type of movement is actually how lot of people see success in the markets.

Still don’t know what I am talking about? Watch the video below to get a better idea on how to trade the movements.