Several years ago, at a dinner in Sydney held by the Australian Technical Analysts Association, I found myself sitting next to an architect who told me that every year he flew to Spain and ran with the bulls in Pamplona. As a herd of bulls destined for bullfights are released from their pens, they run to the bull ring through the narrow streets of this medieval town. A crowd of men race in front of the bulls, taking the risk of getting gored or trampled if they do not run fast enough. I asked him why he did it, and he said that nothing else made him feel as alive as flirting with mortal danger.
I sometimes wonder whether trying to short market tops is similar to running in front of a thundering herd. This pursuit attracts us not only with its great profit potential, but also with the emotional satisfaction of having challenged and outrun the crowd.
This weekly chart of NWRE shows a terrific opportunity to sell short near the top in early 2006. A false breakout to a new high, accompanied by a bearish divergence A-B, rang the bell for short-sellers. The wonderful thing about the middle of any chart is that trading signals stand out so clearly. The problem is that the closer we get to the right edge, the foggier the market becomes. I have not yet found a broker who will take my orders in the middle of the chart—they all want me to ...