Updated April 2020
The Dow Jones Industrial Average
The markets are not free; corrections end at arbitrary points. In other words, the top players decide when the markets will correct and how far they will drop and or rise.
This is why we focus on the trend and not absolute price targets as almost all free-market forces have been removed. However, some individuals are still fixated to the idea of exact points, as opposed to the idea of viewing strong pullbacks as buying opportunities.
This kind of mentality is what led these individuals to miss out on this 7-year bull market, and they look back sorrowfully wishing they had jumped in. What they forget is that they were doing the same thing today as they were doing yesterday; this is the reason this market is likely to trade much higher than most expect. Yes, the outlook certainly does not look rosy right now, and things look dire right now, but this has always been the case. Look at a past previous market disaster and see if anything has changed. As soon as the markets started to pullback, the Doctors of Doom started to blow their trumpets. Fast forward and the financial markets have not ended. This article is a perfect example of how the Media does nothing but fan the flames.
The biggest losers on the day: airlines, major insurers face tens of billions of dollars in claims after last week’s attacks, as well as financial services, travel and hotels, and retail stocks. The biggest winners: defense and security stocks. “I understand it’s tough right now. Transportation, business is hurting, obviously the market was correcting before this crisis. But the underpinnings for economic growth are there,” Bush told reporters at the Pentagon.
“Companies can buy back their own stocks, and that is something that I hope companies will do, and I hope that they consider strongly,” says former Labor Secretary Robert Reich, who is now a professor at Brandeis University in Waltham, Mass. Still, it will be a tough task to get the exchange up and running full-steam, say experts. Full Story
Oh just in case you did not figure out, the above excerpt is not from last week’s action though it sounds dangerously similar. The above comments were made years ago when the Dow was trading in the 8900 ranges.
The Dow Jones Industrial Average; Profit When The Masses Panic
Don’t become part of the mass mindset and fret and worry about every move the markets make. Instead, focus on the stocks you would like to own and then use such wonderful corrections to open positions in the companies you were dying to open yesterday but could not because the price was not attractive. We are not advocating that you jump into the markets right away and blindly purchase everything in sight. What we are stating is that you now have time to look for hidden opportunities. You can compile a list of stocks you always wanted to own. Markets spend more time trending upwards then they do downwards. The top players have made their fortunes by buying when everyone is selling and vice versa.
There are many investors out there who embrace the herd mentality, and the poignant part is that they do not even realize this. By being part of the herd, they will end up buying right at the top out of pure frustration at having missed the entire ride up by and selling at the bottom.
Must read: The fact that Americans prefer to drink coffee than own stocks indicates that markets are more likely to trend higher than crash. Our V-indicator has surged to a new high so as we stated last year in the December 2015 newsletter; traders need to be prepared to deal with extreme volatility.
If reason governed markets, then all those with Ph.D.’s and higher education would be the ones raking in the highest gains; instead, these chaps are the ones that consistently lose. You need to change your mindset now and throw this fear out of the window. Stop waiting for someone else to give you the push you need to give yourself; you cannot expect someone to dig you out of the trench you dug yourself into. Your biggest problem is fear; the second one is that you are angry and upset that you missed the ride up so far. The longer you hold onto the old mindset, the more you will lose.
You have two options now
- Change today or risk losing even more in gains. There is no such thing as a perfect entry point. As we have stated for the umpteenth time, there are almost no free market forces at play now; the top players decide at what arbitrary levels the correction ends. This is another reason the markets are experiencing such extreme moves as predicted in advance by our V-indicator. So the solution is simple. Make up a list of stocks, ETF’s, I-shares, etc. that you wanted to buy and use strong pull backs to open new positions.
- The second option is to continue to doing what you are doing now and hope that the outcome changes with the time. However, remember that the definition of insanity is doing the same thing over and over again, and hoping for a new outcome.
The trend has not turned negative on any of the indices though it has turned neutral on one of them. Neutral is not something we are going to worry about. Our V indicator has surged to yet another high, so extreme volatility is here to stay. In fact, 2016 will probably be remembered as the most volatile year on record.
Should you panic and join the masses? That choice is up to you. History indicates that the masses always panic and the wrong moment. Clearly sentiment was far from euphoric; thus, the current market action looks more like a correction than a crash.
What separates today from yesterday? Nothing today is the tomorrow you worried about yesterday and that is how it will remain for most investors. They worry about this and worry about that, and while they are worrying the markets are trending higher. When they finally stop worrying and jump in, it’s usually too late.
Why do the masses always jump in late?
They are held back by fear and then suddenly try to do something because they are angry that they missed this ride. Mark our words, these individuals will jump into the markets almost at or close to the top; at that point Euphoria will be setting in, and it will be time for us to leave. What we find strange and amusing is how they will persuade themselves to jump into the market one day in the future when it is extremely overvalued, and how they hesitate to do anything when it is not.
Do not join this crew, for even though they claim to want change, they do the same thing over and over again. If they would simply sit down and look at what drove them before, they will see that the same set of silly emotions is driving them today. Hence, they are destined to lose. You cannot win using a methodology that failed before.
If you are part of this group and want to break free, then force yourself to go against your emotions. Do the opposite of what you think you should, especially if it has failed to produce any results in the past. Going forward view every strong pullback as a buying opportunity; change will not come from standing still. This outlook will prevail until the trend turns negative.
In the short term, we expect more volatility as emotions will do the talking now as our V-indicator has soared to a new all-time high. The correction is much stronger than previous corrections and given the run-up this market has experienced it is totally normal. You will even see many claim that a new bearish phase has taken hold. However, like all previous market selloffs, this will one will prove to be another great buying opportunity for the astute investor.
The astute investor will use this time to build up a nice list of stocks that he or she always wanted to own at a lower price. Opportunity comes when you least expect it. Instead of panicking, take the time to compile a list of stocks you always wanted to own but did not buy because the price was too high. In a follow-up update, we will put out a list of the 10 top sectors and top 15 stocks in the market based on relative strength.
Crises refine life. In them, you discover what you are.
Allan K. Chalmers
The Dow Jones Industrial Average Outlook April 2020 Update
The masses are nervous so opportunity is in the air. Astute investors should use the current panic to load up on top-notch companies for 12 months from now the masses will be screaming in frustrations that they let another good opportunity slip.
Insiders have been using this massive pullback to purchase shares, and one way to measure the intensity of their buying is to check the sell to buy ratio. Any reading 2.00 is considered normal, and below 0.90 is considered as exceptionally bullish. So what do you think the current ratio is; well, it’s at a mind-numbing 0.35, which means these guys are backing up the truck and purchasing shares.
So what are the readings today? Based on very heavy transaction volume, Vickers’ benchmark NYSE/ASE One-Week Sell/Buy Ratio is 0.33, and the Total one-week reading is 0.35. Insiders are not just buying shares, they are devouring shares. Insiders behaved in a similar fashion in late-December 2018, after stocks crashed on Christmas Eve; in early 2016, when stocks also corrected; and in late 2008/early 2009, at the depths of the Great Recession correction. Those were spectacular times to buy stocks. Insiders seem to be telling us that today offers a similar opportunity. https://yhoo.it/2TV0cE2
Other articles of Interest:
Stock Trends & The Corona Virus Factor (March 14)
Trading The Markets & Investor Sentiment (March 3)
Stock Market Bull 2019 & Forever QE (June 13)