Market Volatility: To Dance or Not to?

This pattern of rising Market volatility will continue until the MACD’s (in the weekly charts posted below) undergo a bullish crossover, or the bullish sentiment drops below 20. One final option is for neutral sentiment to soar to the 48 to 51 ranges; the higher, the better. If one or more of these conditions are met, volatility levels should drop significantly and potentially trigger an explosive upward move. Market Update October 16, 2021

Instead of Neutral readings soaring to 48, bullish readings broke new ground. This reading is well above its historical average. However, the latest batch of data indicates that the readings will drop to the 37 to 38 ranges. This suggests uncertainty is still the dominant emotion, for bullish readings have not remained above their historical average for even two weeks in a row.

The Markets are trending higher even when our indicators are pulling back. In the past, this has led to explosive price movement. The MACD’s are dangerously close to experiencing a bullish crossover. Once the crossover completes, Dow 37k is virtually a done deal and market volatility levels should pull back. The Dow could potentially trade as high as 39K before putting in a multi-month top. 2022 will probably be the year that the Robin Hood class of investment amateurs will be sorely tested.

It’s also most likely the year that will test every trader that falls into the average to mediocre category. This represents 90% of traders. As always, they will panic at the wrong moment, creating a tremendous buying opportunity.

Every pullback after July of 2020 could only be classified as a joke. Only investors that fully grasp the basic principle of Mass Psychology will do well in 2022, and thankfully, that includes most Tactical Investors. Hence be prepared for the first strong correction since the crash of 2020. When the markets pull back, do the unthinkable. Celebrate while others panic.

We are the only newsletter that we know of that has advocated celebrating during sharp pullbacks. So far, this strategy has made investing more fun. More importantly, the results indicate that this strategy works incredibly well. Never panic with the masses, and on the same token, never celebrate with them. From the inception of time, the masses have, are and will always be cannon fodder. If you think otherwise, we strongly suggest that you view the video Pluto’s allegory of the cave.

Bullish readings have soared to 48 and are now trading well above their historical average, which indicates that the markets will remain volatile until bullish readings drop below 39. This volatility could last well into the first 15 days of November. However, the market’s pattern indicates that a multi-week bottom is likely to take hold towards the 1^st week of November.

Conclusion

The markets are holding up remarkably well. Once this corrective phase is over, the most likely follow through outcome is a potent rally. Market Update October 16, 2021

Any pullback the markets experience between now and early November should be viewed through a bullish lens. Riches come to those that seek it and rags to the fools that chase it. Patience and discipline are of paramount importance when acquiring anything of value in one’s life. Without them, you are just another tumbleweed that will be blown in whatever direction your emotions are trending in.

This is the index we spoke of in the last update. It’s a contrarian type index because the information will be utilised in a non-conventional manner. Bright individuals are terrible when it comes to investing. Bright refers to being highly educated. Most of today’s Phd’s suffer from permanent head damage. When you look at most college graduates, their ability to think critically is on par with the friendly burro. This index is brand new, so we are forward-testing it. The current reading is bullish as most of the educated crowd is nervous. The most likely outcome is that the markets will continue to trend higher. Market volatility tends to rise when bright individuals start to embrace the stock market.

Overall, our game plan remains unchanged. The stronger the deviation, the better the opportunity.