Stock Market Bull 2019; Follow The Trend & Avoid The Noise -

Stock Market Bull 2019

For those that followed our suggestions of not giving into fear and stampeding with the crowd, the rewards are starting to flow in. First of all, we scored our first home run for the year, closing half our position in AMKR calls for almost 125% in gains. Fear never pays off; learn to deal with it today, or risk paying the fear premium for life. To learn to fish you have to understand that fear has no place in the equation of life; this is something almost every service out there purposely ignores because they do not want to teach their subscribers how to fish. Sadly, what is even worse is that many of them do not even know how to fish themselves.

The Masses are still nervous

Overall the masses are still nervous as can be seen by looking at the sentiment data above. While the number of bulls has risen, there are still too many individuals in the neutral camp. Additionally, the markets are climbing a wall of worry, which is a very bullish development. Trade wars, government shutdown, political infighting, and a host of other events; despite this, the markets are trending upwards, slowly but surely. Eventually, when one or two of these negative factors are eliminated there is every reason to believe that the markets will explode. Fear does not pay, and we once again proved that in real time; when the markets were pulling back sharply, we refused to give into to it and to all of you that took a similar path, congratulations are in order. Until the masses turn euphoric, stock market bull 2019 will remain in play.

Stock Market Bull 2019 will Fool Market Timers

Now the reason most market timers fail is that they are trying to time the markets and therein lays the mistake. They should be timing the emotion. Emotions drive the markets; everything else is noise. Identify the emotion, and you identify the trend, and then the rest is history. The masses are always wrong in the long run and therefore if they are euphoric, its time to move to cash or short and vice versa. Remember mass psychology is not about identifying a change in emotion but identifying extreme changes, and that is where it differs from contrarian investing. We do not take an opposite stance until the emotion driving the masses hits a boiling point. Bottom line, there is going to be a lot more nonsense thrown out there, but until the masses are ecstatic, this market is unlikely to crash.

The mass mindset is wired for failure

The average trader has a convoluted view of the markets and the world. They are forever willing to bend the definition of risk and opportunity to suit whatever perspective is taking the lead role at the moment. When prices are low, they assume that it is the wrong time to buy because they are bound to go lower, and when they are soaring upwards, they assume that it is the right time to buy because they are bound to soar even higher. The concept of risk to reward is thrown out of the window; they state they seek an opportunity with low risk, but their actions speak otherwise. No Bull Market has ever ended on a note of fear; they end when the crowd is in a state of ecstasy

One needs to understand the difference between a battle and a war. You can lose several battles but still win the war, or win many battles and still end up losing the war. It comes down to how much damage you incur as opposed to losing or winning the battle. If you minimise the damage, you can lose several battles in a row, retreat and regroup and come back and win the war.

Every bull market experiences at least one sharp pullback (shakeout)

One never knows when that will occur exactly. A shakeout is not the same as a market putting in a long-term top. The big players need someone to sell these stocks to before they cash out.

Unlike the shakeout phase, one can identify a topping phase based on market sentiment. During the topping phase, the masses remain unusually resilient when the market experiences a sharp correction; they have now been lead to believe that every pullback is an opportunity. When the masses believe this, its time to head for the hills. Case and point Bitcoin. Throughout its fall, the masses remained bullish, and despite the heavy beating it has already taken experts are still issuing insane targets even now when Bitcoin is trading below 5K, which means that Bitcoin the odds of it hitting 3K are far higher than 15K.

Tactical Investor Aug 2019 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.

Stock Market Bull 2019; Follow The Trend & Avoid The Noise