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The signal that the stock market has peaked?

the stock market

Although I know how to judge when the bear market is over and when I should buy at the bottom, I still don't know how to judge the selling at the top. I'm afraid I don't know when to leave the market after buying stocks in the future. If you have also tried to avoid the crash, stock market crash, and even bear market, or always hold stocks at these times.

These four tricks are based on my experience in the stock market for more than 10 years. They help me hold cash early before many market declines, so I suggest that you must see the end. It is likely to help you invest in stocks. 

Raise to another level. Because knowing how to go is more important than knowing how to buy, and knowing how to go is an important factor in determining how much you can earn or lose.

The first trick, everyone needs to learn to identify the Distribution Day. As the name implies, the shipping day is a day of huge selling pressure. On that day, it may be that large accounts are shipping. If the market goes up or down, it must pass through large accounts, that is, fund investors participate in buying or selling goods.

 Only then can the market form an upward trend or a downward trend, so when we read the charts of the broader market, we must understand the information that the chart reveals to us.

There are two conditions for how to identify the shipping date. I take February 24 as an example. The first condition of the shipping date is on a falling day, and its trading volume is higher than the previous day. The second condition is that the trading volume on that day is higher than the 50-day average trading volume. You will see that there is a red line on the trading volume. 

This red line is the 50-day average trading volume. Look back in February. On the 24th day, it is that both conditions are met, so the power of selling goods on this day is very huge, and retail investors in the market cannot do this kind of selling pressure, so this day is the shipment day. I would like to add one more thing about the shipping date. 

Sometimes the shipping day may not necessarily fall. If it rises on that day, the increase is very slight, or it would have risen a lot, but then the increase has narrowed sharply so that the whole day has hardly risen. At the same time, the trading volume is also larger than the previous day, even if it is higher than the 50-day average trading volume, that day can also be the shipping day.

Large households can still use that day to deliver goods. For example, on July 24, 2017, the increase on this day was very slight, but the volume was 471Million, which was higher than the average volume of 465Million in 50 days. The volume on this day is also higher than the 466Million of the previous day, so although the market has risen this day, it can also be a shipment day. Next is the key point. 

One or two days of shipping day often happens, but if there are 4 shipping days within 2-4 weeks, this is the warning signal issued by the market to you, you need to enter the alert state.

So here I repeat the first trick first. If there are 4 consecutive shipping days within 2-4 weeks, you need to enter the alert state immediately. The definition of the shipping day is that the day is a falling day or a slightly rising day. , But its volume is higher than the previous day, or even higher than the average volume of 50 days.

Next, I will talk about the second and third strokes, and then we will apply the 3 strokes together. The second move, pay attention to the sudden trend of the broader market. What is an abrupt trend? As the name implies, it is very sudden and weird. For example, there was a large volatility decline that day. 

If you know how to look at the candlestick (Kline), you will see a large black candlestick. Often these abrupt trends are around 3% or even high. Less than 3%. In a normal uptrend, you would not expect to see a large decline. When the market shows a large volatility decline, it means that a large number of funds fled the market that day.

This is also an unhealthy signal. To add a little more, the abrupt trend includes a gapping decline in addition to the fall of the black candlestick. Take February 24, 2020, as an example.

 If you zoom in a little, you will see this day. It was a gaping fall. Although the candle body is not long, it has left a big gap, and the volatility of this day is more than 3%, so the trend of gapping and falling is also considered a sudden trend. It shows that the market was very panicked at the time, and many investors couldn't wait to sell, they couldn't even wait, they didn't even ask the price to sell at the time of the market opening, so this kind of rift was caused.

Also, you can see that the trend throughout the day has been going down. In other words, at the opening of the market, a large number of investors fled the market without asking for money and goods, and no large investors were willing to panic. 

Under the circumstances, bargain-hunting will push the market up, but instead, you will see investors of all sizes, who are constantly selling and leaving the market throughout the day, so you will see that after the gap opening, the whole day is finally black Closing the market, which shows that the market has no purchasing power at all, is dominated by selling goods.

The third measure is the proportion of constituent stocks higher than 50 days in the index and the proportion of constituent stocks higher than 200 days in the index. There is a divergence signal from the broader market. First of all, what are the two indexes? 

This index is Measures how many index stocks in the market were above the 50-day/200-day moving average. Here is a percentage to show you. For example, if its degree is 47, it means that 47% of the index stocks are above the 50-day moving average. The following is a reading of the ratio above the 200-day moving average. For example, here it means that there were 67.86% of the index at that time. Constituent stocks are above the 200-day moving average.

Now let's go back to the third move, why are these two indicators so useful? The reason is that these two indicators can tell us more deeply whether the uptrend at that moment is a solid uptrend, that is, while the index is rising, are the index stocks also in a healthy uptrend? Or, when the index falls, whether the index stocks are still weak or have begun to strengthen so that we know more.

At that time, the most real situation of the index, because the index is composed of index constituent stocks, so when we judge the market conditions, we should judge the market's physical fitness according to the actual performance of the index constituent stocks, so the market index is just a Lagging indicator. 

If you interpret the broader market, you are not starting from the essence of the broader market, that is, the performance of individual index constituents. 

You will always catch the wind and always slow down the market a few beats because you use second-hand information that is not critical to interpreting the market. , And what does this secondary, non-critical secondary information include?

 Including news, current affairs information, market information, comment analysis, opinions, etc. from the Internet, newspapers, and major media. And the technical indicators commonly used by many people

For example, RSI, MACD, OBV, etc., basically do not use these traditional technical indicators such as MACD, Poly Channel, RSI.

I will only study in-depth, the actual price behavior, volume, and trend performance, because these are first-hand information rather than second-hand information, so let’s see how these two indicators are applied. I will use recent examples to explain, First from mid-January to mid-February 2020, the market continues to rise, but if you just look at it from the surface

You may still be buying goods at these locations, or you may hold an overly large part size, just like someone who is just sick. There may be no symptoms on the surface unless you help him to take a pulse or do a physical examination, you will know that his body has appeared abnormal.

So when you want to understand the real physique of the market, you need to look at these two indicators. We will now do a physical check for the market. I will draw a trend line here to show that the market is still rising, but please look at the composition Among the stocks, the proportion of constituent stocks above 50 moving averages. This ratio has been declining while the market has been rising. What information does it reveal?

Tell you that when the market is rising, more and more stocks have fallen below the 50-day moving average, which means that there are fewer and fewer stocks participating in the upward trend in the market. Let's look at the ratio above the 200-day moving average. 

At mid-month, about 80% of stocks were above the 200-day moving average, but by mid-February, only 70% of stocks were above the 200-day moving average. Don’t forget that at the time, the broader market continued to rise, and it was still at a new high. 

Why is it that in the index stocks, from 70% of stocks in January are above the 50-day moving average, to only 60% of stocks in February Why are there fewer and fewer stocks above the 50-day moving average and the 200-day moving average?

The reason is that smart funds are drained from the market. The uptrend you are seeing is not healthy. It may just be a blind eye for big players. 

They use a small number of funds to support some of the more weighted stocks or continue to push up some weighted stocks, while other larger amounts of funds are cashed out of other stocks, creating the illusion that the market is still singing and dancing. If you don’t see the essence of the broader market, it’s easy to see that the market is rising and then some stocks are falling. 

They feel that they have the opportunity to buy bargains because they see the market rising and feel that the market is still very safe. As a result, they are smart enough to think they have found something good. I don’t know that at this time they saw the so-called falling bargains, it was precise that large households were secretly shipping.

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