I'd like to hear others' thoughts on which is a better market for a true die hard contrarian to enter. 1) the "blood on the streets" view. Buy panic, fear, hysteria, etc... 2) the apathetic, sleeper bottom view. Buying markets at lows not do to fear and volatility, but due to long and slow declines with few people knowing/caring. I've found a lot of examples of this type in Jim Roger's writings. I hope I described and differentiated each well enough. Thanks guys.
blood on streets typically short term bottoms. real bottoms carved out over long periods of time after several double/triple panic bottoms. so the first good for short term traders, the second fer investors.
It depends on the market, in my opinion. In stocks bottoms are marked by fear. But some commodities, corn for example, bottoms are apathetic. I believe it has to do with the difference in participants in various markets. Also, some markets adjust supply after a price change differently than other markets. One other thing, some markets rely more heavily on perceived value than others. The perception of a stock's value plays a large role while perception plays a smaller role in many commodities. I'm just an amateur however so make of this what you will.
Both. Panic bottoms usually have a short-term bounce a little afterwards. But what happens from that point on is entirely dependent on underlying conditions, not whether the bottom had panic/fear or indifference/scepticism. Panic bottoms that became major long-term bull markets: Asia 1998 Russia 1998 Brazil 2002 Argentina 2001 Global equites on the eve of the Iraq invasion US Bonds 1981 Sleeper bottoms that became major bull markets: Commodities 2000-2003 Oil 1998 Nikkei 2003 US real estate 1995-96 US stocks 1981-82
To me the best long term plays are the sleeper bottoms. Gold in 1999 and 2000 - there was one big spike related to the signing of the Washington Agreement in October - did this. Tech stocks just finished one, and are now being noticed again. To me, right now, the big plays are gold in the latter stages of the first leg of a new secular bull, and tech in the beginning of the last leg of an old secular bull. A little complicated, but the markets are never simple.
The bottom has already happended. Just look at any index chart. While the market may need some time to stabilize and become decidedly bullish; its certainly not bearish.
Great thoughts guys, I really appreciate it. I tend to agree, I don't particularly think one is more profitable than the other, I do think that panic bottoms are a bit easier to spot, but require slightly stonger nerves and better timing.
good thread. and i'm seeing fewer good threads that don't disolve into a pissing contest. so i really do appreciate a good one like this. i was almost going to say, 'lets see how long it takes before this one disolves too', but on second thought i'm coming to ET a lot less often so i probably won't see it/won't care anyway.
Imo blood on the streets markets are far more enjoyable to contrarian trade for a daytrader. Intraday volatility can be extreme, profits can be quick, and equity can be revolved in and out very efficiently. Opportunties are opportunties, but the ladder requires more patience, tying up capital longer, taking more overnight/time risk, and in my case is simply harder to quantify specific entry points in order to capitalize on movements right away and avoid shortterm losses in the meantime.