NEW YORK (TheGoldAndOilGuy.com) -- Timing stock market tops and bottoms is risky business and we all know the more the more risk we take the more potential gain would could also make. Correctly timing a top or bottom for any investment is flat out exciting not to mention financially rewarding. But this high risk trading tactic does come with some major issues which you must FULLY understand so that you can protect your capital and self-confidence.On May 13 I wrote a
Market Directory -- You Are HereStock market tops are tough to trade and time. That is because there are so many things happening in the media and emotions running wild that it's tough to get a grasp on what you should really be focusing on to keep a level head trade around it. Market tops are typically not an event but rather a progression that takes much longer than most individuals expect. I still find myself jumping the gun at times and I know this and have been through this process hundreds of times in various investments. The human brain is a powerful tool but emotions can force you to override your rules/strategy still.
Stop Fighting! -- Bulls & Bears are BOTH Correct at this StageIt does not matter where you go to get your stock market news and reports... Everyone is arguing their bullish or bearish case more than ever. There is a reason for this and it's because the S&P 500, DJIA, RUT and Nasdaq appear to be entering a cycle top. What does this mean? It means the uptrend is almost over from a technical analyst point of view, and those who have been bearish for a long time feel in their gut the market topping out more now than ever.
Timing the Market Top Conclusion:In short, from a technical point of view the S&P 500 remains in an uptrend. But according to technical analysis the upside momentum is starting to slow. If we get a few more down days then the trend will flip and be down but it has not yet happened. When the trend does reverse down you must remember that 80% of the time price will bounce back up to test near the recent highs before truly rolling over and collapsing. Think of it like a zombie movie. Just when you think you killed one it comes back to life for one last scare before its dead. Just to touch on stock market bottoms so you do not get confused. Stock market bottoms are little different than tops so they are traded differently. I will cover them when the time comes.
Trading the market is not easy during this type of condition, which is why members and myself got long SSO on the May 23 and two days later sold out for a 3.5% gain. I am now looking to reload this week for another bounce/rally play but only time will tell if we get another setup. Get Chris Vermeulen's Trade Alerts at: TheGoldAndOilGuy.com
Follow @TheTechTraders This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.