Predict the Next Bull or Bear Market and Win by Michael Sincere

Author:Michael Sincere [Sincere, Michael]
Language: eng
Format: epub
Publisher: Adams Media

CHAPTER 8

Characteristics and Strategies of a Sideways Market

Not many people like a sideways market, and it’s easy to understand why. A sideways market can be dangerous and unpredictable, but it can also be flat and boring. When a market goes sideways, the bears and bulls fight for control, and it can take months or longer before a winner is declared. Sometimes, after a lengthy bull market, a market may go sideways before turning into a bear market.

Bullish analysts say that the market is “consolidating”—that is, taking a rest before going higher again. There is nothing wrong with this point of view, and in fact they could be right. Some cautious bears, however, may wait safely on the sidelines until a winner is declared (bull or bear). Those with a bearish view generally believe the sideways market will end badly.

Investing in or trading a sideways market is extremely challenging, and is frustrating for both the bulls and bears. The bears are unhappy because the market doesn’t go down low enough to make a profit. The bulls are unhappy because the market stops going straight up and begins to meander around.

A sideways market is an indecisive one. Once you identify a sideways market, think of whether the previous trend was bullish or bearish. If it follows a lengthy bull market, a bear market could be near, but it’s not guaranteed.

A sideways market can occur at any time and last for months, sometimes years. Often it will appear at the end of a trend. For example, if there is a strong bull market that is coming to an end, instead of moving into a bear market, the market may go sideways for a long period.

A sideways market that occurs during a bull market can be dangerous. More than likely, it means that the bull market is coming to an end, but it takes time to know for sure. It’s also possible for the market to go sideways, then continue moving up (consolidation). In that case, the bull market will resume.

During a sideways market, the bulls and bears appear to be having a tug of war with no clear winner—at first. It’s essential that you don’t become impatient. Often the smartest move you can make is to sit and wait. In fact, the biggest mistake you can make is to try to force profits. That is a sure way of losing money.

There are two main types of sideways markets: volatile and flat. During a flat sideways market, volume is low, and few market participants want to commit new money to the market. It’s as if the entire market has been put to sleep.

The volatile sideways market is more exciting and offers more trading opportunities, but it still goes nowhere. Let’s analyze this more closely.

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