VALUE VERSUS MOMENTUM
Momentum is the link between buying discounted value and selling parabolic mania. Value that morphs into momentum requires:
- A sense of panic fueled by shorts who want out at any price and new longs who are afraid to “miss the train.” This unique alignment of psychology sets forth the optimum “pivot point.”
- Mass participation. Moving average crossovers, especially Golden Cross patterns, perpetuate and amplify the breakout move, leading to expanding volume. Such conditions attract momentum traders who launch prices to manic levels.