The Question of Direction and Trend

With world markets collapsing, I was 100% certain that the stock market world is ending.  Something occurred to me though when I read the YM status of a contact of mine.  It read, “Be fearful when others are greedy. Be greedy when others are fearful.”  It hit me then that “others” (myself included) are fearful.  Should I be a contrarian then and start positioning?  Ermm…  Not too fast.

There are two possible scenarios.  First, the PSEi will find support at current levels, form a bear flag before its eventual breakdown below 3,700.  Second, the PSEi will merely move sideways from here with support at 3,700 and resistance at 4,400 to 4,500.  Take note of resistances at 4,120 (50% retracement) and 4,250 (62% ret.). Also remember, the shallower the bounce, the stronger the downtrend. So if the PSEi does rally from here but fails to even go near the 50% retracement, then you can expect a breakdown from this range.  In a nutshell, the question we should be asking is, is this the beginning of a downtrend or are we merely moving sideways?  Hmm…Thoughts?

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