Situation Awareness Is A Must for Traders or Investors

Sometimes it’s hard to see the forest through the trees. As investors or traders, we must be sure to change our frame of focus in order to keep our footing and plays on solid ground. If we don’t, we could be going long or short at the wrong time. As we’ve seen recently, even the pros like Paulson and top hedge funds are challenged in the markets lately.

We talked about an investor or trader having to develop a sense of sight and smell and with the combination of fundamentals and technicals, one can time the markets and harvest a high rate of return and beat the market averages. That’s not to say that one can do so without constantly surveying the landscape to find divergences in the indicators OR to consider what might go wrong.  Another thing is to think of one climbing a ladder, it helps to know how high one is as that lets you know how far you can fall. This relates to the markets in that we talked about what the markets have for support and how the 70 week moving average (350dma) has served as major support over the last 10 years.

This week is a huge week for the markets. The impending US debt ceiling deadline will likely move the markets in both directions. Given the breakdown in the debt ceiling talks after Friday’s close, it will be interesting to see what happens overnight and tomorrow. If you have been out of touch, here are the two sides of what happened Friday evening:

President Obama Answers Press Questions
Fri. Jul. 22 2011 | 6:15 PM[23:38]
President Obama answers press questions on reaching a debt deal and what would happen if the US cannot avoid default.

Boehner Pressed on Broken Debt Talks
Fri. Jul. 22 2011 | 7:20 PM[09:56]
GOP House Speaker John Boehner explains why he walked out of debt talks with President Obama. “It’s not in the best interest of the country …

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