My initial task is to judge which markets are in major up or down trends. I do this by looking at a multi-year chart, then assessing the interplay between sentiment, price action, and dynamic fundamentals (i.e. not stuff that is clearly priced in already). E.g. a market where the price is moving up longer term, but which experiences extreme bearish sentiment at the lows of intermediate term corrections, then reverses, is behaving bullishly. A market which keeps surging to new highs whilst sentiment is broadly sceptical, is also bullish. A market which fails at major highs where sentiment is bullish, but then rapidly falls and makes major new lows, whilst sentiment remains bullish or in denial, is indicating a major downtrend, and so on.
Secondly, once I have identified a major trend which I might be able to exploit, I have to decide when to enter the trend. You can make money by buying intermediate highs in long-term bull markets, but obviously that is much less profitable and more risky than buying short or intermediate-term lows in the same bull market. So, I will look to enter long-term bull moves during short/intermediate-term price weakness, and try to avoid heavy commitments when the short-term trend has already moved far and appears overextended, with excessive bullish sentiment and too many weak longs in the market. As a contingency in case I fail to enter on a correction low and the market starts to run away from me, I will enter on sustained new breakout highs, rather than remain flat while the trend continues without me. In addition, I will also exit temporarily if the market makes a major reversal signal.
