Fear and Gain

Source: Phobiawiki

If you've been avoiding the financial markets or investing in risky assets because "that's the only thing you can make money on these days", I hope you take this post to heart.

Should we be "Terrified" as the Dow breaks 25,000?

https://www.cnbc.com/2018/01/05/dow-25000-investors-should-be-terrified-about-dow-25000-analyst-says.html

The answer, I believe right now is No. Not yet. Based on what I'm seeing, not investing now would be a mistake. I can't say what all of 2018 will be like, but what I do know is that Dow Theory has been screaming "buy" for over a year.

 If you haven't been listening, now's the time to start - before it really is too late.

Trailing Returns

If you had invested EVERYTHING into the S&P 500, based on Dow Theory analysis and reinvested all of the dividends, you would be sitting on a 21.99% annualized return.

For long term investors, this is spectacular. Most long term investors want an average return of 10%. 12% is considered excellent over the long term. So consider that next year or the year after will see some movement into a bear market (maybe!). When that comes, we will either want to average down as the market bottoms, or we will want to have the guts to cash out proactively, ride the wave down and re-invest when the indexes confirm a reversal in trend.

The Best Investment Advice of 2017

The best investment advice of 2017 didn't come from a newsletter, the financial times, CNN, or MSN money. It came to you right here:Stay invested in the broad markets. They will keep hitting new highs until something materially changes.

We can maybe expect some profit taking as things get overbought, but both indexes have confirmed the primary trend as UP. Until this changes, the primary long term trend remains UP.

Take note and invest accordingly.

This is not advice for day traders, but for investors with long time horizons (5 years +).

Financial News & The Fear Factor

Once again, the financial news is more interested in making you scared, often in order to make you buy their services or watch their programs than giving you real advice.

https://blogs.wsj.com/moneybeat/2017/08/02/dow-discord-as-djia-flirts-with-22000-transports-send-an-ominous-signal/

https://etfdailynews.com/2017/08/05/transport-divergence-a-concern-for-dow-jones-industrial-average/

http://www.cbsnews.com/news/stocks-are-climbing-ever-higher-be-worried/

So, let's look at the facts again and breathe.

1. The Dow Jones Industrial Average continues to hit all time highs.
2. The Dow Jones Transportation Index hit an all time high, then retreated to an intermediate low.

This in itself is not a concern. However, if the Transportation index fails to make a new all time high on it's next extended rally (remember: we will only know slightly in retrospect as we are looking at the WEEKLY charts, not the daily charts), then and only then will it be time to start getting concerned.

Until then, sleep well! Like, a solid 7 or 8 hours a night. Seriously. It'll be good for you!

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.

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.

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.

Bull Market Still Continues

  Image source: www.bankers-anonymous.com

I haven't made a single post since December 2015. Do you know why this is?

Because of these numbers ...

Bull Market Continues

I haven't posted anything lately because, frankly there was nothing to write about.

The markets whipsawed but now that we have simple indicators (52 week highs) for each index, unless you cannot read or are horribly mamed in an accident and need to have both eyes patched, you will be able to easily know when this bull market starts to unravel.

Here is what to look for
1) the transportation index surges to a new high that is not confirmed by the dow industrials.

That's it. When this happens, it's time to build cash by selling weaker positions and/or short the market.

Dow Theory - How does a Bear Market Become a Bull Market?

In a word, stay the course and watch the weekly closes of the indexes.

Over the past two years, the Dow Jones industrials and S&P 500 have been in a bear market (kind of ... more below). But recently, they started hitting new all time highs over and over again. The Dow Transportations stopped confirming the new all time highs being made by the Industrials a full two years ago. The Transportations subsequently lost 27% of their value between December 2014 and June 2015. That's the classic definition of a bear market.

Transports Make New all Time High! Bull Market Confirmed

Here are a couple more scenarios that could unfold in the near future.

#1 The Dow could fall to it's last reversal level, which was 17888.28 and the Transportations could fall to 8018.55 before reversing course and heading higher again.

#2 The Transportations could make new all time highs, which would then signal the continuation of the bull market we're already in.

#3 The Dow could continue rising while the transportations stall out just shy of making new all time highs. The higher the Dow climbs, the harder it will fall in this scenario. We are looking at a potential 17% decline in the Dow if the Transportations don't make a new all time high soon. That number gets bigger the longer the Dow climbs while the transports stay stalled out. Getting in near the bottom of that kind of decline would be awesome, because the primary trend is still UP. If the Dow climbs much higher, I will be looking at profit taking and perhaps even shorting the markets. We'll see.

The Dow Transportations will make new all time highs!

According to Dow Theory, now is the time to buy into the large cap indexes. For this, I will be purchasing units of TD US index - I

Another good option if you have a larger chunk to invest with is the iShares core S&P 500 ETF

Happy investing :)

So Close! Or is it? Here are The Possibilities

It's funny how the relationship between the Dow Jones Industrials and the Dow Jones Transportation indexes can mirror what I'm already seeing.

You see, I do quite a bit of research even though my posts are short. After I've completed my research, I look at the Dow relationship and I am often surprised that this one index relationship mirrors what I've been concluding based on my research. It could be confirmation bias, but then again, I've made some 'surprisingly' accurate calls. This isn't an accident, nor am I some sort of magician. It all comes back to Dow Theory.

Keep Calm - Dec 5, 2016

It looks like things are going to turn out exactly as I said they would. Italy's "No" vote will be the beginning of a euphoria for US stocks. Keep in mind, I said "looks like" not "is" ...

Not There Yet - Dec 2, 2016

I am still waiting for the transportation index ....

9199.65

One of the interesting things about Dow's theory of the stock markets is his postulation that current prices reflect all current knowledge. I think, therefore, that it's telling when the Dow has been surging to new all time highs, reflecting an assumed increase in future consumer confidence through increased production and warehouse sales.

But the transportations are stalling.

So Close! Nov 28/16

Hold off on pressing your sell buttons.

While The DJT's retreat away from hitting new all time highs doesn't signal the bull market we've been waiting for, it does paint a potential picture of a cooling off period.

Here's the thing, with the DOW hitting new highs not being confirmed by the DJT, it signals more whipsaw sell offs are likely on the table. So don't be surprised to see a heafty sell off. But don't be surprised if that sell off bottoms quickly and turns into another rally.

Close to "All In" - Nov 27/16

The Dow Jones Transportation Average is closing in on the all important 9199.65 level I want to see before deploying the balance of my cash into the broad markets.

Get Ready! December Might be Totally Awesome

9199.65

That's the number we want to see surpassed on the Dow Transportation Average.

What's Going on With Mr. Market?

There is still no clear sign on the direction of the stock markets. But there is a lot more volatility these days, so it's advisable to stick with companies which are very stable, especially in the precious metals space.

Bull Market Trend Continues

It's crazy, but we're still in a bull market.

But I'm not buying.

Don't get on the bandwagon just yet

But don't get off it either!

The major US stock markets are making new all time highs, and it's tempting to jump in. But that pesky indicator, the transportation market, has been refusing to catch up.

IF a fire is lit under the transportation sector as a whole, we'll be in business for yet another bull run.

I wait with bated breath.
 (that means I'm not selling or buying ... I'm holding)