Sunday, November 30, 2008

Profit Taking or Just a Down Day?

Often times when a finance site posts a story on a big down day with no apparent news to explain it, the term "profit taking" is thrown around as a catch-all phrase. Seriously, the real profit taking is done towards the close of the previous day's action and the down day that ensues after is merely a knee-jerk reaction as the market contracts in a normal fashion.

As we approach the dawn of a new and expanding market recovering from the worst days, we will see several contractions. The size and length of these will be directly proportional to the size and breadth of the preceding days of expansion. There will always be some profit taking along the way, but a down day is just simply that. Let's not label it the same way every time there is no news to explain it, other than the normal cycle of the growing market.

Have a good one,
Roger

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