To be honest I don’t know, nor does anyone else despite what they might say. There is usually a substantial amount of nervousness when you have a major markets slip for two days in a row. However, this has to be put into context of the overall gains in the market post the GFC .
In terms of trading the last few months have been good for trend followers. The attached chart is from our conservative index trend following model which shows a gain on the Dow CFD of around 1056 points since last September. Entry points are denoted by the green arrows whereas the red arrows denote the exit.
The thing to note about this system is that it is a recoil system that is it simply responds to dynamic inputs from the market, as such it is not predictive. In hindsight it always appears to be somewhat late to the party but that is its focus since it is not designed to try and hit the top or the bottom of the market. Which I believe to be functionally impossible to do.
