After consulting with my trading partners it was decided I could talk, in general terms, about the future market. You must be aware I can’t get into specifics, as it’s seen as a conflict by most.
First off, the only reason I chimed in early last Jan. was due to all the confusion going on. When I saw the thread where it was asked, “Can the stock market get any lower?” I could no longer remain silent. It was at that point I started giving hints of how nasty things could still get and to use rallies to escape & get back in when we made a good bottom.
Of course right away I get a remark about what’s a good bottom, which almost made me say the heck with this thread.
Also, some feel the market can’t be timed or projected. Some say no one knows what will happen so just ride it out. I know of some that ignored my bear call of late Feb. 2000 that are still wondering what’s going on.
Some say buying stocks while they fall is a losing situation. It is if you don’t know what you’re doing.
Some will say I have 20 years so I’m not worried about it. Many forget or aren’t aware of what happened from the late 60s thru the early 80s where you either traded or ended up with little more than what you started with. I will say here, right now & without a doubt a period similar to the 70s is coming again, which some of my long time followers are aware of the timing.
I must back up a bit and go back to my conversation with Mr. Sparks last fall when I told him I was becoming concerned about the market. My long-term system went on a sell about 1 week before that top. That system is currently sitting on the fence but will be updated in about a week.
Many also don’t believe it can be suggested when a turning point will come. Yet again I’ve done this 3 times in the past month or so to within a day including the Jan. actions.
Some don’t believe price levels & time together can be projected. I did this Feb. 21 on this thread.
Before I get into any type of projections I ask you read the following. This is something I’ve sent to all clients before I allowed them to sign up. Even though many of my members have seen me get in and out of the market since the mid 70s with a great deal of accuracy or were referred to me, I don’t accept a client unless they believe buy & hold can be beaten.
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Turning points are nothing more than predictable cycles to us that understand them. I can in a sense suggest to you the following. >>>>>>>>>>>>>>>>>>
We accept that at any given point within any given year the sun will appear on the horizon and disappear knowing when that time will be. Same issue happens with the moon, ocean tides, general seasonal effects, the planets & their moons, galaxy rotations etc. How do we know this?
If it happens twice without interruption, a pattern is emerging. Odds are if it happens a few dozen times with fair consistency it’ll continue to happen with some type of a predicable pattern. The more often something happens the more likely it’ll occur again.
Look at the hospitals and jails along with the moon cycles. 911 calls increase greatly to within 1 day of the full moon. Coincidence? Then how come it happens month after month after month?
Remember, the market is millions of people making very specific decisions under many different circumstances & reasons every second, minute, hour, day, week, month etc. Sometimes issues are self-perpetuating. If you believe it’ll happen, human nature will make it happen.
If emotions make us do certain things, how can one overcome this? How can I believe the stars aren’t influencing my adviser?
For heavens sake it’s not all about the stars. Even though certain events outside of our control influence us, certain patterns will be changed at some point in time.
While certain events have a reason and an effect on our judgment, we have market cycle studies that go back over 500 years. Wait, we haven’t had a market for 500 years. No but parts of Europe did and we can go back into Roman times if needed. But, the point I’m making, for those with an open mind, is everything works in cycles just like the tides, waves at a beach, the human body etc.
Every action has a reaction. But, certain cyclical periods will have a bigger after effect than others. In other words certain actions will in effect have more energy released, which you will see me refer to as coiling.
Ever watch the movie Pappion when Steve McQueen escapes from the cliff island? If not rent the movie. Note where he tells Dustin Hoffman how the wave actions around the island change in a very predicable fashion. On occasion a larger wave is developed that pulls out to sea instead of crashing on the rocks, that’s also predictable.
Now, I don’t know if the method of Pappion’s island escape is true or not. But the scene of the movie I’m referring to does reflect nature and how the market tends to react as well.
Projecting market cycles is, in a sense, like back ward engineering an apparatus that you have no clue as to how it works. You’d tear the unit down, inspect, test components & construct a plan or step-by-step instructions on how to construct another. Projecting turning points in time & their degree of relevance in the market is much the same.
With all the above being accepted as fact &/or probable we can move on.
If you disagree with the general concept so be it. I wish you the best of luck.
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Ok, the above is what everyone gets before I offer help.
Market volatility always brings opportunity. Opportunity can come in many forms and can take several months. Sometimes you raise cash on rallies. Opportunity comes in buying dips. But most of the time for a long-term trader/investor, opportunity is best used to consolidate allocations.
Many think they need to be diversified. For gosh sakes, I know people that hold 5-6 if not more general funds. In reality, when looking at most general market funds, they all hold a similar portion of the same stocks. There are exceptions but generally speaking they all fluctuate to a similar degree that the general market does.
If you want be diversified hold one large cap fund, one mid cap fund and one small cap fund. Typically with everyone I work with we only hold one fund. It’s usually a fund that tends to track the ^SPX or an ^SPX index fund.
Here’s another form of diversification that should require no explanation. Most of my clients that aren’t tied into a 401K group have their funds split 3 ways between Rydex, Profunds and a general brokerage house of their choice. Those in general brokerage houses will typically buy an ETF for long/short plays.
Smaller accounts can look at Potomac funds and a brokerage house.
Those looking for a brokerage house should only consider the ones whose money markets are in government securities.
Some will complain about the higher costs of Potomac, Rydex and Profunds. GEZ get real! One good short trade or any trade a year will offset those expenses versus groups that tie you down to limited trades and on the long side only. Even for those that only want to trade 2-3 times a year. Get a good short play now and then!!! Think about it!!
Regarding most general fund groups.
While this doesn’t apply to all, another reason to consolidate funds into 2 maybe 3 at the most is to give you a greater ability to get out. A good case in point is last fall. I had a new client come into our fold that was holding 6 or 7 funds all within one family. The rules within that family only allowed 2 exchanges a month. Plus, even if one followed the 2 exchange rule, if a pattern was seen of frequent trading, it could be possible they might not let her buy back in. I told her to call the fund group and ask if the trading pattern could be escalated, as she wanted to consolidate things. They’d allow her to consolidate but not sell everything and then re-enter at a later date unless she waited a year. Since the individual was holding multiple funds she watched a good part of her gains slip away for several months.
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Give me till about mid next week to get my intermediate term model updated. I’ll speculate if we approach the Jan. lows within the next 5-8 trading days it’s another buy point.