Phases of the Market

Question 1

All liquid markets:

a) go through phases
b) constantly repeat
c) cannot be predicted with total accuracy
d) all of the above

Answer 1

d) all of the above

Question 2

The most likely phase for a market to be in is:

a) congestion
b) trending
c) blowoff
d) none of the above

Answer 2

a) congestion

Question 3

Congestion is marked by an invisible upper boundaries known as:

a) support
b) resistance
c) double top
d) both a and b

Answer 3

b) resistance

Question 4

Double tops occur when:

a) the weak hands turn strong
b) the strong hands take profit
c) new money enters the market
d) all of the above

Answer 4

d) all of the above

Question 5

Congestion markets can extend for how long?

a) Never more than six months; they then are known as a trend.
b) Until they breakout to a trend.
c) There is no time limit.
d) All of the above.

Answer 5

c) There is no time limit.

Question 6

What happens once a market breaks out from congestion?

a) A trending market has begun.
b) It can go back into congestion.
c) A double top must have been violated.
d) High-frequency traders will be scrambling for cover.

Answer 6

b) It can go back into congestion.

Question 7

When is a trending market confirmed?

a) The double top or double bottom is violated.
b) The market makes a new higher high and a higher low.
c) The market has a 45-degree downtrend confirmed.
d) New money enters the market.

Answer 7

b) The market makes a new higher high and a higher low.

Question 8

What happens when a false breakout occurs?

a) The market goes back to congestion.
b) It fails to make new higher highs or lower lows.
c) The strong hands trade places with the weak hands.
d) All of the above

Answer 8

d) All of the above

Question 9

Even in a bull market of 45 degrees:

a) the weak hands will push the market down
b) there can be a congestion phase
c) the strong hands can become the weak hands
d) all of the above

Answer 9

d) all of the above

Question 10

All bear trending markets are controlled by:

a) the weak hands
b) the strong hands
c) new money
d) none of the above

Answer 10

b) the strong hands
c) new money *1/2 credit

Question 11

All bull markets have which characteristic(s)?

a) They are controlled by the strong hands.
b) Stubborn weak hands will be hurt financially.
c) It will make a series of higher highs.
d) All of the above.

Answer 11

d) All of the above.

Question 12

What happens when the angle of the bull market approaches 60 degrees?

a) The last of the weak hands will be getting forced out.
b) Longs will be the strong hands.
c) New money will come in on the long side of the market.
d) None of the above.

Answer 12

b) Longs will be the strong hands.
1/2 credit for a) and c)

Question 13

What happens during the blowoff phase?

a) The weak hands become price insensitive.
b) The weak hands are forced out.
c) New money joins the market.
d) All of the above.

Answer 13

d) All of the above.

Question 14

What causes a blowoff?

a) unexpected news
b) change in market sentiment
c) the strong hands and weak hands both lose money
d) fear or greed

Answer 14

d) fear or greed

Question 15

A blowoff is characterized by:

a) the weak hands capitulating
b) new money entering and forcing the market in the other direction
c) strong hands reversing their position
d) all of the above

Answer 15

d) all of the above