Fed interest rate predicts bearish markets
So as we all know, we're in a bubble right now. Now we know that, what would be the best thing to do? What if you're on a dollar cost averaging strategy and you know we're in a bubble?
First of all, you can ride it out. This is the default strategy and there's not much wrong with that.
Secondly, if you're semi actively watching the market, you can try to anticipate on the bubble collapse which is inevitably coming by stopping your long trades. When do you know it's time to stop your long trades, since you have to know when the collapse actually starts?
I think the answer is in the fed interest rate. Each time just before the bubble collapsed, the fed interest either went up or it plateau'd on a high level. Since the fed interest rate is today still at a very low level, I think it's not yet time to stop your long trades.
First of all, you can ride it out. This is the default strategy and there's not much wrong with that.
Secondly, if you're semi actively watching the market, you can try to anticipate on the bubble collapse which is inevitably coming by stopping your long trades. When do you know it's time to stop your long trades, since you have to know when the collapse actually starts?
I think the answer is in the fed interest rate. Each time just before the bubble collapsed, the fed interest either went up or it plateau'd on a high level. Since the fed interest rate is today still at a very low level, I think it's not yet time to stop your long trades.
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