Markets always go back to mean

26.01.2021  Markets always go back to the mean

All analysis like everything else is based on past history of the markets. There are just too many variants and processes developed by different people at different times. Experience has taught that the simplest form is always the best.

For simplicity , we will assume that the markets are always on a bull run and are always trending inclined slightly upwards when seen from a longer duration perspective. The below figure will clear this phenomenon.

The trend line is shown in red. The black phase/cycle line donates the price and time and is seen moving above and below the red trend line.
It is always assumed that the price/time line in black will always move back towards the red mean trend line.
The chart for nasdaq below will make this clear further

In the nasdaq file above , the mean trendline is drawn with the first low and first high.

One can see the similarity in the 1990 -1999 and the 2010 -2020 scenerio.