Taiwan’s God of share market 胡立阳 say there are 4 stages when Fed tapering the QE. First is the rumour of QE tapering, second is the reaction of the stock market increase volatility because the rumour is getting more real, 3rd is the actual tapering of QE where the stock market plunge further, 4th is the increase of interest rate where not only stock market plunge further, the housing market also drop.
I believe we can apply some of this concept on the search for the bottom as well. First is the initial plunge of the stock market. 2nd is people enthusiastically ask about bottom fishing., but stock market continue to plunge 3rd is stock market continue to plunge, most of the people already sold and they will warn anyone who want to buy not to buy. There is so many pessimism and skeptical surrounding as there is no recovery hope. 4th stock market range bounce at certain level with great volatility and volume rise. That is when there is huge change hand of stock ownership from those pessimistic people to optimistic people. Stock ownership structure change to those savvy and long term investor. That should be the bottom! Of course those skeptical and pessimistic people remain their believe. They will always ask, can drop further or not? don't put all in one basket etc etc. They only started to want to come in after the stock market has rebound significantly.
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