Stock market timing: Bull & Bear
Before we get into any commentary take a look at the images and charts below. Remember that the best time to buy from a long term perspective is when blood is flowing freely in the streets and blood is flowing now. Finally, keep in mind that we have always advocated that crashes are nothing but long term buying opportunities. Pull up a long term chart and you will be forced to arrive at the same conclusion. The Big player’s game strategy is to get individuals to focus on words such as bear market, crash, and end of the world, etc.; in doing so, the crowd focuses on the tree and forgets the forest.
The anxiety gauge has redlined, and the gauge is in trending in unchartered territory; it has set an all-time new high. Bearish sentiment is approaching the seven-year high level. Fear and hysteria are trading at off the chart levels. Mass psychology states that stock markets never crash when the masses are in a state of panic. Bull markets emerge when the masses panic, so forgot about what happens if the stock market crashes scenario? If it does crash, run out and buy all the top companies; from a long term perspective stock market crashes are fantastic buying opportunities.
If things were declining retail sales would not be improving. Holiday season retail sales are set to exceed the $ one trillion mark for the first time.
The correction of 2008 was warranted as the masses were euphoric in terms of the housing sector; it took a turn for the worse when Lehman brothers were purposely thrown to the curb by the Fed. Regardless of this development, you can see that the markets were trading in the extremely overbought ranges and masses were euphoric.
The same sequence of events occurred during the dot.com bubble and the not too late Bitcoin bubble. If there were charts, we could demonstrate the exact setup going back all the way to the tulip bubble. The masses are not euphoric and the markets are not overbought; hence the current pullback most likely falls into the “opportunity” category. Forget about the Bull & Bear Market theory, instead focus on the trend as it is your friend. Everything else falls under the category of noise.
Aug 2019 Commentary update
When the SPX is trading well above its 99 EMA (exponential moving average), it either pulls back or consolidates. The pullback or consolidation, in turn, pushes our indicators towards the oversold ranges and then we can take on higher levels of risk. Our risk to reward models adjusts entry points based on the current state of the market.
This falls under the category of secondary indicators, and we don’t place too much value on them. They are good for detecting small anomalies but are almost useless when it comes to determining the trend. Most of these secondary indicators like this one are suggesting that the markets are trading in the extremely overbought ranges. There is nothing that states just because they are trading in the overbought ranges the markets have to pullback. Remember, on the monthly charts, the markets are still trading in the oversold ranges, so all strong corrections have to be viewed through a bullish lens.
Bull & Bear Market 2020 Update (March 2020)
When blood is flowing in the streets as is the case right now during this coronavirus pandemic, one should consider nibbling at stocks if one has a long term perspective. Do not deploy all your funds in one short but deploy them in lots this way if the stock dips lower your average entry price drops.
When we get into plays (at the Tactical investor) we, don’t think in terms of days. Under normal market conditions, our minimum holding time is several months. Under the current circumstances, our time frames lengthen as the potential for huge profits surges significantly. In the short term, it’s a bloodbath out there but is in such an environment that one finds outstanding opportunities, and that also leads to the dawn of the next bull market.
It is easy to buy when the sun is shining, but the problem is that almost everything is being sold at a premium. It’s when things appear gloomy that the best bargains are found.