July 14, 2017

The Stock Market Boogeymen

Here are the problems with investment newsletters.

#1 If they are too early on a call, they aren't early; they're wrong.

Casey Research is one such newsletter organization that is way too early on their calls for a major market catastrophe. The numbers just don't add up yet.

If you had been following their advice and got out of a chunk of your broad stock market positions a couple of years ago, you would have missed an eyes-closed easy 40-50% increase if you had just stuck with something like NYSE:SPY.

#2 all of their publications that aren't paid are designed to be advertisements for their paid material.

#3 they generally like to sell you worst case scenarios, because "set it and forget it until something changes in a year or more" just isn't very sexy. But as I've learned, it's been hands down the most lucrative strategy for the past 5+ years. One day it WILL change, but until the numbers add up, set it and forget it is simply the way to go.

Now that we are making new all time highs, the question is: how much should I deploy if I have spare cash sitting around?

My gut says to keep minimal cash and buy as large a chunk as you can muster right now before this thing takes off on us again (and I believe it will). Despite the fact that stocks are overvalued, bonds still aren't giving any yield.

Stocks are a lot like housing right now. We're in "seriously?" Territory. It's the wall of worry. Its been a very very long and high wal, which we will not be done climbing until the economy significantly improves for the "bottom 98%".

July 5, 2017

Pay Attention - Divergence

Things just got interesting on the daily charts. The Transportations hit new all time highs, but so far the industrials aren't continuing to confirm (as of July 7, 2017).

This type of divergent move is what I am looking for as a signal to start thinking about taking profits.

But not immediately. There isn't enough data to fully support a thesis of a change in primary trend. For now, it's a hypothesis. So ... I'll need to 'hurry up and wait' to see if something big materializes. For this strategy, I will look to the weekly charts. FYI, the weekly charts are currently painting a much more rosy picture than the daily charts ...

What I'm wanting to see (well, I don't *desire* to see this, but if I do see it I'll be ready) is something like this: hundreds of points of sell off or more in the industrials and the transportations. On the way back up, the transportations make a new all time high and the industrials fail to confirm, or both fail to make new all time highs.

If this happens more than once say, in the next month or two, I'll be taking profits on just about every position in my portfolio. But if both indexes surge to new all time highs, I will not do anything at all and continue to reap the rewards of this impossibly resilient bull market.

June 27, 2017

Dollar Cost Averaging (DCA) Today

The Dow's recent surge to new all time highs was not confirmed by the Transportations, which missed it's mark this month.

This means: buy the dip or simply hold. Since we are still in a secular bull market, it's best to invest lump sums at once. If you can't handle the fear that a bear market may be just around the corner (after all, isn't it always?), then use dollar cost averaging to quel the anxiety so you can sleep at night even if the market tanks for some reason.

New money strategy: For me, I won't be thinking about dollar cost averaging just yet. I'm saving this for when the market is in free-fall. Dollar cost averaging is fantastic in bear markets because it lets you capture varying lower price points with money you've already taken out of the same market at higher price points. The bonus is that perfect timing isn't necessary, just a generally good reading of the market is all that's needed to make this strategy work very well. Hopefully I'll be able to put this idea to the test sometime in the next year or two.

The point: keep investing until a bear market is signaled. At that point, take profits and deploy them as the bear market begins to mature. Use dollar cost averaging as a strategy to keep you sane.

Happy investing.

June 18, 2017

Everything Stays the Same

Nothing's been happening in stock market world other than creation of wealth for those who stay invested. Unless you are a day trader, in which case you are probably losing more money than you make under the guise of "all it takes is one big winner". Statistics are against day traders and stock pickers, which is why I am not one.