STOCK INDEXES REJECTED AT RESISTANCE SIGNAL ANOTHER CORRECTION
Reading Time:4minutes
Stocks
struggled with overhead resistance for the past week. While seasonal
trends usually favor a year-end rally, this year’s rally may already
have finished.
January will be the month
to watch. If the market closes with a positive January, we almost
always have a strong year for stocks. But if not, we could be in for a
doozy of a bear market in the first half of 2023.
This
week we had more hawkish Fed talk on Wednesday, suggesting that rates
will remain higher for a longer period of time. This week’s economic
reports for November showed a drop in retail sales and manufacturing,
which raises concern that the economy is weakening.
Falling
bond yields are also hinting at a recession in 2023, as are falling
commodity prices. Stock indexes look to have had an exhaustion gap
higher, followed by heavy institutional selling after the CPI data came
out. This further confirms my thinking that money managers are
unloading shares into every rally possible before the next major leg
down for stocks.
Dow Jones Index – Daily Chart
The
DIA ETF has failed to break out and extend past the August high. There
is potentially a long way for this index to fall before finding support
at the Oct lows. The next couple of months could be rocky for the
buy-and-hold-hope investors who have Stockholm Syndrome and refuse to manage risk and, by doing so, turn a blind eye to protecting their capital and retirement.
S&P 500 Index – Daily Chart
The
SPY index ETF has been rejected at its falling trend line again. And
while my trading strategies never use falling or rising trend lines,
this goes to show how they can help you spot possibly resistance levels
on the chart. I don’t show the 200 SMA on this chart, but it also is at
the same level helping to act as overhead resistance.
When The Going Gets Tough, The Tough Get Out!
Having
a trading strategy to follow makes all the difference in being able to
see what the market is telling you so that you, in turn, can apply that
knowledge to profitable trades.
Luckily,
a few days ago, my trading strategy provided a market sell signal after
confirming the technical analysis, cycles, sentiment, and volume flow
became weak and indicated that lower prices would likely happen next.
The
nice thing about following price action using technical analysis and
following strict position and risk management rules is that we can
avoid market corrections and profit from them at the same time.
Are you ready to try something different?
2022 has been an excellent year for those investing with the Consistent Growth Strategy alongside me using my ETF asset hierarchy allocation.
This super-conservative strategy, with a max drawdown of 5.96% since
2007, packs a powerful punch with an average compounded return of
15.62% yearly. This year we keep hitting new high-water marks
consistently: May, Aug, Sept, and again this week.
I
recently chatted with a subscriber investor who loves how I navigate
these markets and manage the positions. He said he has NEVER had any
paid-for-investment advice tell him to move his portfolio to cash –
which is what I do, FYI.
He then
went on to say that he never realized the importance of being right out
of the market and in cash at times. While he stated he does not make
any money sitting in cash, he sure loved watching the markets fall
without him, something equally important as making money, and has
learned a HUGE lesson this year following my investing signals.
What
I do is different. Many investors have extreme difficulty breaking free
of the old-school thinking of always owning assets. This same investor
said he has told many friends and family about this way of thinking,
but they are afraid of change. And even though they are down 15-25%,
they are not ready to be free of the buy-and-hold torture method.
With
that said, subscribers and I entered a new position to try and profit
from this next market move, and so far, things are looking as promising
as always.
INVESTING DIFFERENTLY FOR AN UNCOMPROMISED FUTURE (PART 2)
Reading Time:5minutes
In
this article I will continue to explain what INNER-Market Analysis is
and how you can benefit from it. If you have not yet read the first
part of this you can read itHERE.
What Is Really Going On With Your Emotionally Driven Investing Results?
Why
do we feel the need to over-analyze our analysis? Could it be that the
habit is hiding a major psychological glitch? Maybe it’s really a
desire for control.
The need for
information and confirmation fulfills a major need in all of us: the
need for certainty. This need is also a primal human desire. No one
likes to feel out of control, and the market can often make you feel
that way because it can be uncertain and chaotic.
When
the winds of change blow, the need for certainty can kick in and
override the proper decision-making tools that serve you as an investor
and trader.
Particularly at times when
we feel the wind of change blowing around us, this need for certainty
becomes an overriding desire. It makes us prone to doing all those
things we know will not work for us as an investor.
Your
feeling to play it safe can mask a deep fear that goes right to the
core of your very existence. Uncertainty makes you fear for your life.
And it’s like being that bullfighter staring down the bull without
taking action. You have to take action and overcome the fear.
On
the flip side, if you feel the need to trade fast-moving stocks and
think you need to always have your money invested in positions, then
you likely have a very different issue you are dealing with. This is
the most common problem and misconception among both active traders and
investors, and leads to a lot of trading, is highly emotional, and
churns your account without any real growth.
Knowing
your personally type is a great first step in resolving these issues.
In a previous post called A Valuable Lesson In Knowing Your
Personality Type For Investing, I share the pros and cons of not
knowing your personality type and a fun test that will tell you how
your brain functions and perceives situations.
You
cannot know the outcome of an event that has not yet happened. All the
analysis in the world will not guarantee that you are on the right side
of a trade. I know that you don’t want to hear this, but your
over-analysis serves as a mental safety net that cocoons you in an
illusion. You think that you can predict with a higher degree of
certainty the most likely outcome of an impending move in an investment.
There
are only three things you can know for certain when you put on a new
trade, no matter how much time you spend on your analysis: 1. You know your entry price. 2. You know where your stop is. 3. You know your position size.
Beyond
that point, you are in unknown territory. Deep down, every trader and
investor knows this, even though we try to override this deep truth
with the tools of our trade and the research and analysis we do.
Please
don’t get me wrong: I am not asking you to abandon your research and
analysis. It is a very useful tool to give you a trading edge and
should be used. However, analysis is just that: a tool and not a means
to an end and I explained Why Technical Analysis Is Critical for The Success Of Traders And Investors in a previous post.
If
you can become aware of the fact that hours of analysis is actually
stopping you from making money (rather than contributing to your
success), you may want to look at analysis in a new way, which is what
I help individuals figure out through my weekly articles and stock
market signals newsletters.
You might
want to ask yourself at what point your need for analysis, reading the
news, and other opinions becomes a distraction and begins to cover up
other issues, like the fear of uncertainty and the need to be right.
Self-awareness and self-observation are essential skills we need to sharpen in order to become better traders and investors.
Complex
things aren’t always better. For me, I think that the simpler things
are, the more profound they will be. Generally, individuals are
attracted to complex methods and systems. Complexity, however,
introduces risks of confusion and analysis-paralysis.
Turning Market Noise Into Investing Signals
The
chart below filters out all the market noise and converts it into
black-and-white data, but in this case, green and red trading and
investing signals. This is the daily chart for trading, but I have
created a similar strategy on the weekly chart forlonger-term passive investorsto ride bull markets up and to avoid and profit from falling prices.
Concluding Thoughts:
Now that you know more aboutINNER-Market analysisfrom
Part 1 of this article, you can choose the style of trading that fits
your personally, available time, and skills that you feel comfortable
using. These would be swing trading, position trading, and active
investing.
Next, you need to select a
few different technical indicators to apply. Remember, each must
measure a different aspect of the market to give you that
three-dimensional view of the market. I share the indicators I use in mybook.
INNER-Market Analysis
As Mark Zuckerberg said,“The Trick ISN’T ADDING STUFF. IT’S TAKING IT AWAY.”Nothing
could be more true. If you want to be a winning trader consistently,
you’ve got to take baby steps. You need to learn one area of the market
at a time and use only the best indicators and tools possible.
168, looks to be Fibonacci resistance on our GLD chart. 160 may be a must hold level for gold bulls. The US dollar still holding possible support.
OEXTrader.com
INVESTING DIFFERENTLY FOR AN UNCOMPROMISED FINANCIAL FUTURE
Reading Time:8minutes
I
am going to teach you how to see the markets from a third dimension
using INNER-Market analysis. It’s the study of what affects price
movements, things like volume, cycles, volatility, and market
sentiment. Each area provides excellent insight into when the price of
any asset should move, how far, and how fast. By knowing this type of
information with a high degree of certainty, we can benefit greatly and
enjoy an uncompromised retirement.
I am
going to show you the difference between single-price analysis and
INNER-Market Analysis. If you place your hand over one of your eyes and
try walking around the room. With only one eye open, your field of
vision is limited, and your ability to visualize your surroundings is
severely restricted. Most importantly, you have no depth perception.
This is how most investors make their trading decisions, with a
one-dimensional view of their investment. Now drop your hand and look
around the room with both eyes. You can instantly see where everything
is located and, most importantly, the distance from you. You benefit
from the three-dimensional depth of the room and all its furnishings.
If
you have ever been to a shooting range, then you likely observe that 99
percent of people fire their pistol or rifle with only one eye open.
But those who have been highly trained often fire with both eyes open
for a clear field of vision.
Would you have an advantage if you tackled your trading the same way, with both eyes wide open?
INNER-Market
Analysis adds depth to your trading decisions. So as we go through this
topic together, remember to keep your eyes wide open and have a clear
field of vision. The best traders in the world have an uncanny ability
to see the unseen. And this is because they understand and use all the
related parts of a particular investment. They understand what drives
the price and have created a trading strategy that keeps the odds
greatly in their favor. This means more times than not, you can
forecast market movements and be appropriately positioned prior to a
move.
INNER-Market analysis gives us
great insight. Don’t limit yourself to single-price analysis to
determine market direction. Many popular single-price-based indicators
are useful to one degree or another for analyzing market behavior. But
they are most effective when used in combination with INNER-Market
Analysis to get a three-dimensional view of the market. This is not a
case of “either-or.” Single price indicators should be used as a
confirmation filter for INNER-Market analysis. In this manner, marginal
trades can be filtered out and avoided.
This
distinction can be visualized by contrasting the rectangle on the left
side (representing single-price analysis) with the three-dimensional
cube on the right side (representing INNER-Market analysis).
INNER-Market
analysis should be your foundation for analyzing the market. It has the
strengths of single-price analysis while adding multiple other
dimensions to the analytic framework so that the behavior of the market
can be analyzed internally as well as externally.
Market Analysis Styles Comparison
I
have outlined some of the distinctions, from a practical investing
standpoint, between INNER-Market analysis and single-price analysis in
the table below:
One
mistake some Investors make is not doing anything at all. Either they
struggle to understand the trends and potential at any given time and
freeze with analysis paralysis, or they use the old-fashioned
buy-and-hope strategy, which carries a very high level of risk for all
investors over the age of 50.
There’s a
fine line between action and inaction and understanding when you should
revest your assets. Moving your money into assets that are rising and
ditching assets falling in price is the best way to take advantage of
tax loss harvesting and for your account value to rise, even when the
prices of stocks and bonds are falling. But analysis paralysis is never
good because it can get you into a cycle of waiting and holding, which
can be highly stressful and costly during market corrections.
Most
investors and traders do not realize that exiting losing positions and
booking the loss can be a good thing. In this article, Your Trading Losses Explained, And How to Turn It Into Profits,you
will get a better understanding of how this works. You will learn how
to leave the old buy-and-hope strategy and start investing in a way
that only holds assets in your portfolio that are rising in value. It’s
the polar-opposite of how everyone else invests and experiences the
market.
Let’s go a little deeper into
analysis paralysis, because if you manage your investments, and rode
the stock and bond market down in 2022, then you are victim, and you
needs to resolve this before the next stock market correction takes
place.
Analysis Paralysis occurs when an
individual becomes so lost in the process of examining and evaluating
various points of data that he or she is unable to make a decision with
it! Imagine being a bullfighter paralyzed in the ring because you are
unsure which way to turn. In seconds the bull takes action and charges,
and if you wait, then it’s too late. Inaction can kill you. As an
investor, it means missed opportunities that can easily lead to miss
profits and large losses in a portfolio.
Often
when examining a chart to decipher which way the price will move next,
the pros outweigh the cons or vice versa, and an individual has a clear
direction and decision to make. When analysis paralysis sets in, it
could be because you never feel comfortable stopping his or her search
for additional criteria to examine in hopes of a definitive buy or sell
signal. It could be that the pros and cons are equally weighted. Or it
could be a personality trait of indecision that needs to be identified
and overcome because the individuals allow themselves to get stuck in a
cycle of inactivity. It’s like writers block or any other inactive
moment that causes lockup or missed opportunity. The brain processes a
plethora of information at once, and the outcome is that the human
attached to the brain is locked up! Analysis paralysis is the trading
version of information overload.
Investors
can get overwhelmed by multiple scenarios, possibilities of movement in
price action, and a dozen or more indicators, and for every case,
there’s an opposing view in the mind of the investor. The conflicting
views create confusion and make it almost impossible to take action and
execute trades with clarity and discipline.
I
had my fair share of analysis paralysis before I learned to keep things
simple. I used to delve into all the details, putting together
speculative theories that sounded great. But when it came down to
pushing the button to execute a trade, I couldn’t do it!
Example Of Too Much Information – Analysis Paralysis
As
you can see from this chart loaded with indicators, it is difficult to
figure out what price will do next. Price has reached and is trading
under the 200-day moving average and is testing the upper Bollinger
band which is should act as resistance. Other indicators are trending
up and down, providing mixed signals.
My market trend signal allowed us to buy GDX for 7% profit in just a few days.
The
vast information available on the internet to feed your thirst for more
information is literally endless. You can search, search and search
some more until you’ve paralyzed your mind. The dividing line between
useful and necessary analysis and over-analysis is fine. Whether you
are a technical trader, a fundamental trader, or a combination of the
two, we are all susceptible to analysis overload. Our lust for analysis
cannot be satiated by the sheer amount of information available to us.
But we do have a choice: We can say, “enough is enough.”
It
took a lot of self-discipline to regain control of my emotions and
actions. I am a huge believer in being around motivational people or
listening to motivational content of all kinds. When driving my truck,
I tell Siri to play YouTube Motivational Speech, and I just randomly
listen to them. I never know who is speaking, but I am constantly
uplifted and energized. It is incredible how many different ways the
same points and theories can be explained.
You
probably know as well as I do how this relentless search for more
information paralyzes your decision-making processes. You miss the good
moves because you weren’t quick enough to figure out your signal. You
miss the good moves because you were otherwise engaged, looking for
more confirming indicators, even when you “knew” that the move was
imminent. This leads to frustration.
We
can easily justify the need to over-analyze, particularly with our
current economic climate. We are at the beginning of a major transition
from one major cycle to another. Individual investors are nervous, and
you are probably trying to analyze it all but are not sure exactly what
to do.
In Part 2 of this article which I
will publish in a few days, I will show you what is needed to become
more successful with your trades and investments with less effort,
stress, and account volatility. Until then, be sure to read up and
learn how you can turn losing trades into a money-making opportunity in
the link mentioned above, and how you must overcome negative biases and
thoughts with positive self-talk.
Also,
feel free to surf my website and learn how you can use my INNER-Market
analysis signals to help with your trading and investing success.
Cautiously optimistic on Bitcoin. May depend on the US dollar holding here.
OEXTrader.com
INVESTORS HAVE STOCKHOLM SYNDROME AND HOW THIS EFFECTS THEIR RETIREMENT
Reading Time:9minutes
In an article I wrote earlier this month, I introduced the concept of investors suffering en masse from a form of Stockholm Syndrome.
Traditionally,
this term has been applied to hostages when they develop empathy for
their captors. The hostages begin to identify and to even assist with
their captors’ cause. The most famous case, and what arguably brought
it to mainstream understanding, was that of Patricia Hearst, a
kidnapped newspaper heiress who, during her captivity, was brainwashed
into robbing banks with her captors in the mid-1970s.
Being
that my brain always has one dial tuned toward trading and investing, I
noticed a line of thinking beginning to form surrounding many of the
conversations with investors and the psychology behind Stockholm
Syndrome.
Investor Story:
I
recently spoke with an investor on the phone who was interested in
learning more about how I invest my capital. During our conversation,
he told me about what he does for a living and how he accumulated his
$1 million-dollar investment account. This man worked a blue-collar job
his entire life, put away a few thousand dollars every year for 30+
years, and followed the buy-and-hold strategy. It worked for him to
build wealth because time was on his side, but it wasn’t sunshine and
roses, and I’m going to tell you why.
Don’t be fooled by passive investing success.
While
the buy-and-hold worked during the first half of his life, it was
challenging to weather bear markets along the way. For example, when
stocks topped out in early 2000, the stock market took over seven years
to get back to breakeven. During the bear market, he spoke with his
advisor for investment advice, and he was told to sit tight, ignore the
falling price, and if he held through it, he would be fine. But the
financial distress, sleepless nights, and relationship issues he had to
endure when he was down more than 50% in only two years was a struggle
and not pleasant, to say the least.
He
then painfully watched his account claw its way back up for another
five years, as the stock index reached its previous high. But the
rollercoaster ride was far from over. Within a month of reaching a new
high, the stock market collapsed again for another 1.5 years. This was
the 2008 global financial crisis in which he had to watch his
investments fall more than 55%.
Once
again, he called his advisor for support, but he was much more stressed
and concerned this time. He was told the same thing by his advisor,
which cost him his marriage during the last bear market. The advice was
to ignore the bear market, hold, and don’t sell; everything would be
alright once the market recovered.
After
13 painful years, the stock market returned to a new high in 2013. This
poor man suffered a total of 13 years with no growth and paid his
advisor every year for the terrible life-changing experience. And even
though the stock market returned to the previous high, the investor was
still down 15% because of the AUM fee.
Investors around the world are challenging and breaking free of the status quo Buy-And-Hold strategy. Thiswhite papershows how you can too.
Investor Stockholm Syndrome Buy-And-Hold Strategy
What
I find frustrating is that both bull markets (2002 and 2008) rallied
over 100% from their lows in order to return to their previous high.
Unfortunately, the buy-and-hold strategy does not allow you to
participate in these powerful and highly profitable multi-year
rallies.
Another thing that an
active investor can profit from is falling prices during bear markets.
There is a huge opportunity, and with the use of technical analysis
that follows price trends and stock market cycles, we can manage our
risk and positions accordingly.
Fast forward to 2022-23:
This
investor, who is now in his 50s, has built substantial wealth through
his dedication to saving and investing. In 2021 when he closed his
eyes, he could see, feel, and smell his retirement, which was just a
couple of years away.
But then, stocks
topped, and both stocks and bonds plummeted in value. This started to
push his retirement further into the future, and with inflation
surging, he needed to downgrade his lifestyle and spending habits. All
of this happened within the first few months of 2022.
His
anxiety started to build as he watched his wealth shrink week after
week. Finally, he knew something had to be done because there was no
way in hell he was going to postpone his retirement another 7-13 years
this time.
Once again, he called his
advisor, desperate to protect his retirement. To his surprise, even
after telling the advisor about his situation, wants, and needs, the
advisor recommended he continue to stick with the buy-and-hold strategy
and just wait it out.
You can
imagine how this investor felt when he heard the same “advice” for the
third time, which didn’t support his current needs or risk tolerance.
The
investor said he blew a gasket, fired his advisor, and moved to cash
until he could figure out what to do with his investment account. His
search led to him calling me to talk about active investing. He wanted
to learn more about technical analysis to identify when an asset was
rising or falling so he could manage his positions and not hold onto
assets falling in value. Lucky for him, what he wanted to learn about
is exactly what I specialize in doing with my own money.
Once
I explained how the four market stages, stock and economic cycles,
technical analysis, and position and risk management from a high
beginner level, a lightbulb went off, and he had the AHA moment about
how to invest for growth without having a large downside risk.
He
was over the moon excited about this newfound knowledge and investment
clarity. And he made a comment about how he had no idea that we could
avoid market corrections and bear markets. He said buy-and-hold
investing was beyond painful, it was torture, and he couldn’t believe
that he was brainwashed into thinking that was just part of investing.
My mission is to help investors retire sooner
Listening
to this man’s story solidified, once more, the driving force in my
life. I want to help as many people as possible avoid these adverse
life-changing events with their stock and bond portfolios. While I only
shared this one story with you, almost everyone I speak with has had a
similar experience, and they are now on a mission to protect their
capital to preserve their retirement and lifestyle. They know holding
stocks and bonds is not a safe strategy for those in the later stages
of their life or who have substantial capital.
In fact, there is a greatwhite paper focusing on how women investorshave
a more difficult time because the financial industry is more
male-driven, and they don’t support or connect what women want and need
when it comes to investing.
Investors at large have Stockholm Syndrome
In
large part, long-term investors have been brainwashed, and as a result,
they struggle to break free of the financial strategies that we were
all told to follow since saving the first penny.
In
this article, I talked about the buy-and-hold strategy, but other
topics I’ll cover in my next posts will shed some light on their flaws:
60/40 portfolio split
Put your age in bonds
Diversify, diversify, diversify
Only a financial professional can safely help you save for retirement
These sub-par strategies and lies cause the most harm
If
your investment portfolio for stocks and bonds has the above
characteristics and you are nearing retirement, then you better do
something to protect your capital before it’s too late. If you
don’t, once the end-of-year rally ends, the music stops, it lights out, game over, kaputski for retirees.
People
are so worried about missing out on a stock market rally that they will
hold their losing positions and risk their retirement. If this sounds
like you, then look out because you don’t know what you are doing, and
you’re investing based on pure emotions (FOMO) without position or risk
management rules in place. I can promise you that it does not end well.
It works during long bull markets, but you will give it all back once a
bear market runs its course.
While I
won’t go into the technical details and charts in this article, just be
aware that both stocks and bonds could fall another 20-47% from the
current levels. Understand, I am not saying it’s going to happen, but
the charts are pointing to very tough times ahead.
If you remove your fear of missing out on a stock and bond rally and think with logic, tell me what you would rather do.
Hold your positions in case stocks and bonds rally, but know if they don’t, you could lose money for 3-10+ years.
Protect
your capital, move to cash, or hold only assets rising in value so you
can profit from falling stock prices and retain your current level of
wealth and revest it later once the market bottoms.
A
common problem with investors is that they start looking for a solution
once they realize they need one. And once an account value falls so
far, you will become too afraid to make a move, like exiting losing
positions and taking the loss.
You
won’t want to sell because your holdings have decreased so much in
value that you think a rally will start any day, and of course, you
don’t want to miss that!
Yet you are torn with the feeling that if the market continues to decline and you don’t sell, you will not be able to retire.
So, fear and indecision reign, and you end up taking the nightmare stock market rollercoaster ride, which may last many years.
Most
people need to realize that taking a loss is okay. For example, if you
have capital losses, then you can use it against equal future gains and
likely not have to pay tax on those new gains. This means you can sell
your bad positions that are trending down and revest that money into
new assets which are rising. Also, you can move to a 100% cash
position, let the stock and bond market bottom, then revest your
capital once a new bull market starts and completely sidestep the chaos.
If
you are nearing retirement, the buy-and-hold strategy carries a very
high level of risk. Simply put, you don’t have the time to wait out
another bear market.
Welcome to theinvestor Stockholm Syndromeeffect or Buy-And-Hold, which I tend to think of as Buy-And-Hope.
There Is Another Way
Over
the past 25 years, I have developed what I believe to be the most
efficient and profitable ETF investing strategy I have ever
experienced. It’s an ETF strategy that seeks consistent above-average
long-term growth with below-average portfolio drawdowns. I call it
the Consistent Growth Strategy (CGS).
CGS
helps investors and financial advisors outperform by solving the major
investment issues of bear markets and replacing the role bonds once
played in a portfolio. It seeks to hold only assets rising in value.
This
tactical asset allocation strategy navigates market advances and
declines using a combination of dividends, growth, bonds, currency, and
inverse exchange-traded funds. Under abnormal market circumstances, up
to 100% of the strategy allocation will be in a defensive cash
position, as its number one priority is to protect capital. Remember,
if you avoid losses, the profits take care of themselves, so don’t let
anyone tell you otherwise. Break free of the zombie advisors and
Stockholm Syndrome today!
We are seeing blue on our OEX, RSI Oscillator chart. Small overhead resistance.
OEXTrader.com
AFTER THIS HOLIDAY RALLY, YOU BETTER KNOW WHEN TO WALK AWAY
Reading Time:10minutes
This
week’s investor insight will make you think twice about the current
stock and bond rally as we head into the end of the year.
We
get a lot of questions about if the stock market has bottomed or if it
is headed lower and how they can take advantage of the next Major
market move. Over the next 6 to 12 months, I expect the market to have
violent price swings that will either make or break your financial
future. So let me show a handful of charts and show what I expect to
unfold.
Let’s dive in.
We’re
told that “quitters never win.” But is it always wise to stick with
something when it no longer serves us or, worse, continues to harm us?
Many
years ago, when Texas hold’em poker was big and online gambling was
allowed in Canada, I used to run a poker league and build custom poker
tables for people across the United States and Canada. I love poker,
and I still play it to this very day, but the game does require skill,
a proper mindset, and self-discipline. Without all three of these
things, poker is pure gambling. It’s the same when it comes to active
trading or investing if you lack the skills, mindset, and
self-discipline.
Retired professional
poker player Annie Duke, who is also a best-selling author, and
decision strategist who advises seed-stage Startups, says that learning
when to quit is a critical skill, especially for investors.
Annie states, “Quitting is a good thing when applied at the right time.”
If
you’ve been following me for any time, then you know I follow a
detailed trading strategy with position and risk management rules. As a
result, you won’t find me taking random trades or trading based on
emotions. Instead, you’ll find me patiently waiting on the sidelines
for a high-probability trade signal to reinvest my capital.
I trade differently. I don’t diversify. I don’t buy-and-hope, and I don’t have any positions at certain times.
What
I do is reinvest in assets that are rising in value. And when a
particular asset stops moving higher, I give up on the position and
exit it immediately. Because I use technical analysis to follow price
action, we can quickly and easily determine if an asset is rising or
falling. Therefore, I can step aside and let the asset fall and look
for a new opportunity that is rising, or hold the falling position and
ride it lower for who knows how long…
Unfortunately,
most traders and investors do not understand how to read the markets,
or they don’t have control of their money. They are at the mercy of
what the market does or the skills of whoever controls their capital.
Let me share some of my market insight and help guide you
Bonds,
the highly touted safe, low-risk asset, fell over 47% from the 2020
high. It caused similar losses to the average investor portfolio
comparable to the 2008 financial crisis.
It was the worst selloff ever for treasury bonds that
I can see on my charting platform. The real kicker is that the selloff
in both stocks and bonds could have been avoided with just a little
education and management. Subscribers and I happened to ride the COVID
bond rally higher by 19%, exited the position, and moved to cash the
day bond prices topped. It was partly luck to exit at the peak, but we
would have exited the following trading session if we didn’t lock in
profits because we managed our positions and risk. As the price
reversed direction, we jumped shipped to one of my favorite positions,
which almost no one thinks about or uses – CASH.
2022
has been a painful year for investors, and people are telling me they
are scared to look at their investment statements. It now looks
like bonds and stocks have
started a seasonal rally that could help lift your portfolio as we head
into the end of the year, but once it ends, look out!
Bonds and Stock Seasonality Price Movement
Daily Chart of 60/40 Portfolio
You
should have seen your account rally 6% or more since Oct 21st, and I
think it will continue higher once the market digests the recent move
up. While this may excite you, be aware that after this rally, we could
see another 20-47% decline in stocks and bonds in 2023. This year-end
bounce is nothing more than an opportunity to get out of the antiquated
Buy-and-Hope strategy that does not work during a volatile and
weakening economic environment.
The next
few charts, which are big heavyweight stocks that drive the market
higher and pull it lower, should help you see what I see.
AAPL Weekly Chart and Potential Breakdown
Apple
is a heavyweight stock. When it moves, it moves the stock market.
Currently, AAPL shares are in what I call a STAGE 3 Distribution phase,
and if support is broken, then look out below!
TSLA Weekly Chart and Potential Breakdown
Tesla shares are another heavyweight, and its weekly chart paints a bleak future for holders.
META (Facebook) Weekly Chart Breakdown Leads The Way Down
Facebook,
or what is now called META, is a heavyweight stock that has already
broken down from its STAGE 3 Distribution phase. As you can see, when
these mega stocks break down and unwind, individual investors who have
their money managed by so-called professionals who don’t know how to
manage risk suffer the most.
The drop in
META shares has held the tech, social, and even the S&P 500, and
Nasdaq from rallying freely to the upside in the past month. When/if
AAPL, TSLA, and other heavyweights break down, expect panic on Wall
Street.
My general rule of thumb is if
someone tells you to diversify into a bunch of different assets,
stocks, commodities, bonds, crypto, etc… then they don’t know what they
are doing. They are a buy-and-hold believer and willing to let their
own money or that of their clients experience the severe price swings
the market dishes out.
Billionaire investor warren Buffet says, “Diversification makes very little sense for those who know what they are doing.”
Multimillionaire investor Jim Rogers said, “Diversification
is something that stockbrokers came up with to protect themselves, so
they wouldn’t get sued for making bad investment choices for clients,
and that you can go broke diversifying.”
The Four Stages Of Asset Prices
If
you think the 2022 pullback has been distressing, you better buckle up
because the bear market has not even technically started yet, from my
standard. Instead, in early 2023 we should enter a STAGE 4 Decline.
This is when people’s financial future and retirement lifestyles are
created or broken, depending on how it’s managed.
Don’t
get me wrong, I’m not saying the market will fall in 2023. I’m letting
you know it’s very possible, and you best have a plan in place. On the
other hand, if the markets have some miraculous recovery and start a
new bull market, well, you better have a plan for that also. Either
way, you need a plan, and if you are a technical trader who follows
price and manages positions, it doesn’t matter what the market does; we
are set either way.
If you want to learn
more about who you are at a deeper level and what you specifically need
to make your personality work best with your trading and investing be
sure you read this and do the mini quiz on yourtrading personality type.
The
S&P 500 chart shows the extreme low that we could possibly reach if
the economy and stock market fully unwind. Bonds would sell off as well
until the Fed decides to step in and starts lowering the rates to try
and save investors, but there will be a delay, and bonds will likely
fall sharply before we see that take effect.
CONCLUDING THOUGHTS:
In short, without going off too much on a rant, you can read the three lies we are told by financial professionals that
really IRK me. Because of these lies, individual investors must work
harder, work longer and often experience painful financial outcomes.
What
you may not know is that what you went through in 2008, the 2020 crash,
and this year’s correction could have been completely avoided. If you
followed a NO BS investing method that tracks price using technical
analysis, is simple to follow, and is uber-conservative, then your
account would be sitting at a new all-time high watermark as of this
week.
The financial industry tells us to do all the wrong things, and almost everyone falls for the BS; it’s so frustrating to watch!
LIE #1: Diversify, Diversify, Diversify
LIE #2: Bonds Are A Safe Investment And Should Represent A Large Portion Of An Investors Portfolio
LIE #3: Speak
With An investment Broker Or Advisor Before Placing Any Trade To Be
Sure It Is Suitable For Your Personal Circumstances.
It’s
total baloney because almost everyone gets the same generic advice,
buy-and-hold stocks and bonds, don’t give up on it, ride out the
rollercoaster, and you will be fine, trust me…
Who
came up with that strategy? Sure, my 10-year-old son could buy some
stocks and bonds once, let it ride for 20-30 years, and be ok. He has
time and not that much money, but the big question is at what age does
the stock and bond, buy-and-hope strategy become a harmful and risky
investment strategy? 50-ish years of age is my thinking.
Knowing
bear markets can take 3-12 years to recover from, someone who is 50+,
planning to retire soon, or is already retired, doesn’t have 10+ years
to keep working and saving to avoid withdrawing funds from their
retirement account. Also, the fact that they have the most wealth ever
in their lifetime, they should be concerned about holding through
future bear markets.
Don’t be
fooled. Just because everyone else has been brainwashed to
buy-and-hold, aka buy-and-hope, and suffers stock market selloffs does
not mean you should…
It’s like the
average investor has Stockholm syndrome. They have all been beaten up
by the markets over and over again. They think that’s how it should be.
And in some cases are paying someone to take their money, plop it into
the market, and do nothing with it for 10 – 40 years. They pay a % of
their life savings each year to someone who has no risk and does not
need to do too much of anything, while the investor suffers massive
multi-year drawdowns, experiences high levels of stress, and sometimes
big losses.
The typical investing experience most people endure is NOT how it should be. There is a better way, and I can show you.
My
passion is trading and investing, having been at it for over 25 years.
My goal is to help as many investors as possible to preserve their
capital during difficult times and also be able to grow their wealth by
trading only the most liquid ETFs. My investing strategy signals allow
individuals to only hold assets that are rising in value.
