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7. Bears push prices lower, overcoming a price area that was their former resistance level, which now becomes their new support area. |
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8. Bears push prices past an old resistance level of point 3 (which was also a former support level, point 1). |
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9. Bears continue to encounter no resistance from the bulls at what was a major resistance level for the bears. |
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10. Bears at last encounter resistance, or it could be that the bears just got tired and overextended themselves. This is similar to the bulls encountering resistance at point 4. |
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11. Bears find support at this level, which coincides with their former resistance level, point 2. The continuity of thought is bearish. |
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If the market is experiencing continuity of bullish thought, then it is a bull market. It will be broken when enough traders perceive that the bulls are no longer the stronger force. Likewise, a bear market will be broken when enough traders perceive that the bears are no longer the stronger force. |
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A market that is sideways to up in trend will exhibit more characteristics of an up market than a down market. I am not being intentionally vague; however, it is a difficult trend to clearly identify. Shortly I will tell you how to use your computer to help define a sideways up or sideways down market. For now I can say only that if you draw a trend line off the peaks, and another trend line off the lows, the slope of the trend lines will be slightly up. |
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Whenever you see a market that is seemingly moving in a sideways channel, it will still have a predilection to be trending up or down. Often this is derived from the operating mode that the market was in prior to entering a sideways channel. There will always be a predilection tending to tip the trend in one direction or the other. |
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The important point I have been building to is this: When you are able to make the distinctions to identify the characteristics of the four operating modes, it is an easy matter to determine if you want to go long or short, or stay out of the market. When you have determined what mode the market is currently in and then a characteristic of that mode is violated, the market is telling you that the current trend is, or could be, about to change. Likewise when that characteristic is respected, then once again you are being told by the market that the trend, and its continuity of thought, is probably valid. |
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You absolutely must make yourself sensitive to what the continuity of thought is in each market that you are following. |
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In the previous examples I used support and resistance price areas as an example of a bull or bear market. Even though they are simple, I still use |
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