when a down tend starts--

Discussion in 'Trading' started by NY_HOOD, Jan 25, 2012.

  1. i noticed market down trends start after a major company posts solid earnings; so strong it almost gives the impression they peaked ( for the moment). i remember a few years back Intel reported a solid quarter and raised guidence. the stock was up almost 2 bucks but slowly sold off throughout the day as the market tanked. there are a few more examples such as qualcomm and chip equipment companies but need to look some others up.
    now we have Apple, the most powerful quarter i have ever seen and block buster guidence. could the market be looking at Apples earnings as a short term peak? the stock was trading at 559 pre market and has since dropped almost 10 points. only time will tell but market tops usually happen when things get overly good for a company. market bottoms happen when things get overly bad.
    just a thought.
  2. cfu


    Correct. What you're referring to basically is sentiment. Think of the dynamic / price action of a 'crash.' In an arbitrary and simplified example, everyone has drank the Kool-Aid and now sitting long. Now everyone sits around and looks at each other as there is no more capital left to buy with or no one else left to join the party and someone decides to head for the exit. Enough leave, causing prices to come in more, and some panic starts (remember, there are always those who have bought at or near the top so they're usually panicky and nervous). They head for the exits along with those that just want to keep profits and the whole thing really unravels, especially when there are only so many exits with so much capacity and no matter how good the news is, they still want out.

    Look at some of the basic principles involved:

    1 - price had to have come up first (probability of prices falling when they're already depressed is unlikely - think Feb / Mar 2009)
    2 - there lack of will or abiltiy of the big player(s) to keep price moving up
    3 - extreme sentiment - the pool of greater fools had finally run out