| The shakeout we saw late Thursday is a great example of how momentum works. Momentum is more about the longer trend than a single movement. We have been in a very long uptrend over all for over a year and although we have had many corrections, the overall trend has sustained. The questions then becomes how do you tell a correction from a full on reversal? For starters, you need multiple days or time periods with lower lows, and lower highs. It sounds pretty obvious but it easy to get too zoomed in to a trend and not see the bigger pattern. You are also looking for the collapse of support. If the trend is bouncing off the 50 or 200 day moving average, that is its support level. The corrections may pull back to this level but, when the momentum is there, the trend will find support and continue moving up. That drop last week after the news about possible gains tax hikes was a good test. If you want to make sure you are following the actual trend and not missing a potential major reversal, you need to take a look at Joe Duffy's video on how you can use momentum to outsmart the Wall Street pros and make them pay you. If you missed it earlier, you can still grab it here
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