Anytime a bull market makes a fresh high I check its pulse by looking at a few things. First I look at the advance decline line. Is it making a new high along with the market? If the answer is yes it means the bull market new high is "legitimate" because there is broad participation i.e. most stocks out there are showing strength. On Friday the total market advance decline line did indeed make a new bull market high signalling the bull trend is firmly in tact.
Next, I look at the general mood amongst investors and in the media. Is there exuberance about this new market high? Some exuberance would actually be normal and not bull market threatening but this has been no normal bull market - it's the most hated bull market of all time. As I've been noting Ad nauseam in prior posts there is no such exuberance, in fact, it's the opposite!.
I like to visit the SPY message board to get a pulse of what the loser trader types are thinking. I have been keeping tabs of a select few of these losers who have been nothing but wrong about the market for nearly 2 years and show all the characteristics of a loser trader - self righteous, big ego, dogmatic, bitter and naive trading methods Here's what one of these losers named Rob Campbell posted on Friday
Trading in this "new normal" era is boring and fruitless for me. I trade because I want more, not need more, but the money is a secondary consideration.
The markets once provide a unique way for one to express their point of view on the economy, market itself, long term trends, rational capital flows. The markets have never been perfect but by and large have provide that opportunity to express a view in the terms of a "bet" and unlike a roulette table have an opportunity to quantify the accuracy of your viewpoint.
This is no longer the case unless your view is "the fed is buying so buy", and that view is so offensive on so many levels I can hardly begin. Mostly, I am not going to go express a long bias in a market that goes up daily on the backs of the taxpaying public many of whom have no interest in the markets and gain nothing except more hard times as their dollars are debased and prices of essential needs go up, just so the power elite can keep the markets afloat. I say let it fail, we need a mass overhaul anyway.
May post again but I am cashing out today, closing my account next week, buying some gold and silver bars and look for something to do with my retirement that does not degrade myself by participating in a ponzi scheme that will leave the citizens of the county holding the bag.
This is the rant of a loser and I see so many similar posts from losers like him. This loser is complaining and is quitting trading because the market didn't do what he believes it should be doing and without any doubt he has lost money as a result. He uses words like "fruitless" and "borning" but the truth is quite likely that he's has been getting creamed given his bearish stance since 2009 and that's the real reason he's quitting trading. And like the consensus view of mickey mouse traders out there, he believes the market rise has been the result of "buying from the fed". Can't these idiots see how pathetic they are saying shit like this? What a bunch of whining sore losers who use any sort of excuse they can to blame their failures on. If you are bearish longer term you are in agreement with bad company.
It seems as if anytime the market makes new highs people get more miserable! What the fuck is this world coming to? This is madness! One thing's for sure...it tells me that this bull market is far from over correction or no correction. Oh and did you notice what this loser said near the end of this rant? He's buying silver and gold bars....hmmm....what does that tell you?
When we do eventually get the correction that everyone is bracing for and I start having doubts about the bull case I'm going to go back to this post and recent ones and say to myself that there's no way the bull market could have been over with the losers of the market - guys like rob campbell and your average main street joe - still bearish...well, I don't want to get dogmatic myself but it just seems inconceivable.
Publish Post
What about mutual fund equity inflow/outflow? I remember back in April 2010, we had retail guys buying into the market through equity mutual fund. That was also the time we had a multi-month consolidation (15% correction), which you've said all along in 2009 that would happen.
ReplyDeleteI do realize there are chumps on Yahoo and MarketWatch message board talking down the market every single day. It is pretty pathetic, but I think what is more important is that most fund managers today are very bullish on equity, so is a lot of individual investors just looking at the stream on Stocktwits.
I have made some mistakes chasing the market lately. However, thanks to the raising market, I got bailed out in the end because of a raising market. Obviously I want to manage my risk so I took some of those positions off the table, but there could be others just like me but much more greedy - which means leaving a lot of chips on the table and not buying protection through options.
The market can certainly go up another 20 - 30 points, but I do feel not a lot of people are prepared for a correction.
in bull markets you need to expect to see some sources of optimism. After all, its a bull market and that means someone out there has to be buying feeling bullish. when optimism gets "over the top" then you should start getting worried. we're nowhere close to that point. By the way, I have found that fading fund manager sentiment is not effective. they have a bullish bias for obvious reasons. The true suckers to fade are retail and although you say see see signs of them becoming more bullish I see just as many who aren't and as I pointed out before, with 2/3 of canadians (and probably americans too) still thinking we are in recession we are nowhere close to the point where "everyone in the pool" and the bull market has exhuasted new sources of buyers.
ReplyDeleteI know what traders are thinking. they see the vix at 15, they see sentiment surveys showing "too many bulls like in 2007", they are seeing inflows and so they are thinking we are giong to get a major correction like the flash crash or even a bull market peak. Well, I have my doubts on either senario playing out. I bet as soon as we start going down people are going to run for the hills and pile into puts and shorts and the "too much bullishness" conditions will be reversed very quickly.
We will probably see another multi-month consolidation phase but this time around, i don't think the downside will be nearly as deep as it was last year. History doesn't repeat so precisely and conveniently.
I personally am not going to get too fixated on the wiggles of the market at this point. Last year was a bit of different situation because history had shown that after about the 1 yr mark of a new bull market, there was a strong tendecy for a major consolidation/correction. We are passed this point now and with the economy gaining traction it's more likely that any consolidation/correction phases will be milder with respect to the downside even though sidways action could last for months.
Looking at the 2003-2007 bull market, there were stocks/sectors that completely ignored any market correction phases and kept on chugging much higher. This also happened last year. So long as there is not a systematic collapse like in 2008, such a thing is certaintly possible again this year and so I think finding these opportunities is a more effective use of time compared to trying to time corrections in a bull market which is frustrating and difficult.
If I get a really strong vibe that a correction is immaanent like I did in early November, I'll say it. I was right back then in calling it but wrong about it's duration. As of now, I don' get this sense just yet especially with the market making a fresh new 2 year high Friday
You know what, you are right. For me I am kind of caught in a conundrum. Because even as a pretty committed bull, I think the market has ran too far too quick recently.
ReplyDeleteBut now that I thought about it. I think in one of your much earlier post, you've mentioned back in 2008 many bears did not make the home run that we all would've expected them to. Just the opposite of what is happening right now, bears covered too early and though the market valuation was getting attractive to a level to take profits and technically market was oversold on many time frames.
It's funny how times have changed. Now its the bull's turn.
If you're confident about the bull market not being over but worried about a correction raise cash to the point that would allow you to sleep at night but have the courage to stay the course with a core long position no matter what.
ReplyDeleteBack in October I posted an excerpt from favorite stock market book Reminiscences of a Stock Operator about bull markets. Here's what I said:
It's important to keep the big picture in mind because big money is made riding big trends and it's so much easier making money going with the big trend then against it. In Reminiscences of a Stock Operator Livermore talked about a man he met at his brokerage house nick named "Partridge". He was an older man who wasn't very active in the market compared to the typical trader there. One day Partridge took a tip from another trader to buy a certain stock. The stock did well and then the tipster advised Partridge to sell so that he can buy back later on the pullback that was overdue and sure to come but he refused. He simply responded "well, this is a bull market you know!” The tipster didn't get it, he thought Partridge was crazy. Partridge told him "when you are as old as I am and you’ve been through as many booms and panics as I have, you’ll know that to lose your position is something nobody can afford". Partridge learned the importance of staying with the primary bullish trend not worrying about corrections because it's not worth trying to save a few dollars from timing a correction compared to the risk of losing out on big gains that the bull market will likely deliver. That sounds a lot like buy and hold doesn't it? It is and in bull markets that what you should do