The Austrian business-cycle theory can help trend followers by taking some of the uncertainty out of trend directions. During bull markets, such as characterized the first six years after the recession, the trend was up about 90% of the time with small dips because 1) the Fed was printing new money like a counterfeiter and inflation rose; 2) profits rebounded as the economy naturally turned around ,and 3) growing risk tolerance drove PE ratios to the sky.
Covel recommends trading the long term trends in his books and the expansion phase of the business cycle is one of the longest, lasting on average about six years. An trend following investor familiar with the ABCT will not mistake dips for trends.
