Email of the day - on tops versus medium-term corrections
Comment of the Day

May 25 2021

Commentary by Eoin Treacy

Email of the day - on tops versus medium-term corrections

Dear Eoin, I hope you are keeping well. A very (very) general query, but I've found myself struggling to distinguish between mean reversion in ongoing trends and type 2 / type 3 trend endings. Can we overlay some (subjective) fundamental analysis to gain some clues at this point, or do we have to "wait for the charts to show us"? Or is it about trend consistency? I accept the uncertainty present in markets and that one man's mean reversion is another man's top / bottom, but as this has been playing on my mind, I thought I'd ask the question. Please feel free to answer this in the context of examples as they come up if that's easier! Sincere thanks for the unique and invaluable service.

Eoin Treacy's view

Distinguishing A top from THE top is a big question and requires us to have an appreciation for what the motivating factor behind a move is. The most pressing point is that every secular bull market is punctuated by several medium-term corrections. Market trends are endlessly fractal so we see evidence of acceleration, massive reactions against the trend and massive congestions areas on occasion.

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