What Do You Mean?

Here are some wisdom-based sayings or phrases dealing with the markets that are worth knowing. In the end if you follow the fundamentals of investing these obstacles will not be in your way of profits.

A) Are we in a “melt up mode”?

Refers to how fast major indices (S&P 500, Nasdaq, etc.) are rising, what’s driving the rally, and whether fundamentals support the growth.

Stocks hitting all-time highs rapidly, high valuations (P/E ratios above historical averages), a rush into tech/growth stocks, retail trading activity spiking (e.g., option buying, meme stocks moving),

Headlines talking about an "unstoppable rally,"...then yes, that is a sign we're in melt-up territory. Not necessarily a bad trend but it sometimes precedes a pull back of a sector or the market.

B) What does it mean when a stock is about to “break out”?

A stock "breakout" is like a coiled spring finally popping, it means the price is moving above a well-defined resistance level (or falling below support, in bearish cases) with force, and traders expect momentum to follow. Charts help to define these breakouts before they happen. The charts will show an ascending (or descending) triangle in symmetrical patterns. Bollinger Bands, RSI, and MACD are the most popular charts for these purposes. Let me know if you would like to see examples of these charts and how to read them.

C) It’s now become a “story dominated market”!

In a Story Driven Market, emotion becomes the tracking over earnings. Hope trumps fundamentals, and hype is more important than valuation. This is the market where someone whispers “Humanoid Robot” at a conference and the stock rips upward 30%, even if they don’t have a product yet. Examples could include: “This biotech firm could cure cancer!” Or “This startup might be the next Tesla!” It’s exciting. It’s dangerous. It rewards quick feet and punishes dead weight. So, trade the story, but don’t marry it. And keep a tight leash on your stops—because fairy tales can turn into horror stories really quick.

Companies rise (or fall) “not because” of what they just did, but what investors believe they could become.

E) It’s getting a Dead Cat Bounce

This describes a temporary, brief increase in the price of a stock or asset after a significant and prolonged decline. It's named after the idea that even a dead cat will bounce if dropped from a great height – a somewhat morbid metaphor for a short-lived recovery.

F) Bull trap

A bull trap occurs when a stock or market appears to be recovering from a downtrend, luring investors into buying, but the price quickly resumes its decline. It's a false signal that can be particularly misleading during volatile periods. To avoid this trap, wait for confirmation of a trend reversal before entering a new trade.

G) We have entered into Correction Territory

This refers to a relatively sharp, short-term decline in the market or a particular asset, typically of at least 10%, before the market resumes its previous trend. It's a temporary reversal of course, rather than a full-blown market downturn.

None of these phrases should put fear into an investor - it is just good to know as it can help you in making decisions about buying or selling.

Results are not typical. I teach methods that have made other investors and traders’ money, but that does not guarantee you will make any money. Success in trading and investing requires work and dedication. Past performance does not indicate future results. All trading carries risks.