Tuesday, January 15, 2013

We follow momentum, not fundamentals


As an analyst, if I am looking at a momentum tool, and I see divergence, well, that is suggestive of market weakness. As a trader I have to focus on what is happening, not what could happen.
If I see the daily trend is up, I have to buy the market. How do I resign myself to the fact that I have divergence, which means a decrease in momentum, a possible weakness, and a possible trend change? I have to focus on what is happening as a trader and the trend is up. How do I reconcile that?

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