Market Rally: Strong, Soft, or a Dud? Decoding the Dynamics
There is too much money out there for it to go anywhere else but the markets (and no matter what the experts state, the worst stock crash in history proved to be a buying opportunity. Nothing has changed since the great depression other than the money supply increasing a thousandfold—the greater the deviation, the better the opportunity. The best place for the smart money to expand its already large war chest is via the stock market. The odds strongly favour a market rally this summer, which will likely be fast and furious.
Here is another dull stock (Monthly chart of KMB); if you purchased it close to its highs in 2008, you would still be holding onto 100% gains. If you employed DRIP and the other tactics that are discussed in the forum (selling covered calls and cash-secured puts), you would be up even more. If you sold cash-secured puts and used some of the proceeds to buy calls, you would be holding a mini-fortune.
Investors have a topsy-turvy view of the World. When it comes to investing, crashes should be viewed as manna from heaven, giving you the chance to buy top companies at a discount. Instead, most panic and press the sell button. Investors need to understand this simple slogan; buy when there is blood in the streets and panic when the masses are joyful. Market Update June 15, 2022
Hence, while everyone thinks the markets will crash this summer, the unexpected outcome is likely to come to pass. Therefore, expect the markets to rally robustly this summer.
Wise words from a veteran investor
‘You must learn to control your fears,’ says investor Warren Kaplan, who uses stock dividends to his advantage and sticks to a disciplined sell strategy
Kaplan is an 85-year-old individual investor with 70 years of stock-trading experience. Kaplan grew up in a poor family in the Bronx, N.Y., but by sticking to four straightforward stock-market strategies through bull- and bear markets, he’s built a comfortable life for himself and his family.
Buy and hold (but not forever): Unlike many investors who buy and hold indefinitely, Kaplan holds stocks until the market environment changes. That catalyst could be a change in management, a dividend cut, technical weakness, poor earnings or overvaluation. If any of these scenarios occur, Kaplan may reduce his holdings or sell all of his shares. .
Sell covered call options: Kaplan regularly sells covered calls on his dividend-paying stocks. Selling covered calls generates a premium and allows him to sell stocks at a price that he specifies. After the stock is automatically sold (according to option rules, it is “called away”), Kaplan waits for a lower price and buys the stock back. Then he sells another covered call. https://cutt.ly/pKqdQTJ
The last point is something traders need to start learning. We have mentioned selling covered calls but selling cash-secured puts is just as effective as generating income.
Stock markets may have become too pessimistic about corporate earnings despite the gloomy outlook for the global economy, according to Sanford C. Bernstein strategists. https://cutt.ly/qKqs7jR
Stock markets always overshoot in both directions (upside and downside) due to the massive amounts of hot money in circulation. As the markets have overshot to the downside, the next market rally will be more potent than most envision.
It’s painful currently but tell me when has any correction been pleasant. Even more unpleasant is knowing you gave in to fear and dumped your shares at or very close to the bottom. No bear market marked the end of the financial system, an irrefutable fact that no one alive can dispute.
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