munKNEE.com Your Key to Making Money
Anytime you see a data set trying to define the entire stock market you can take it with a huge grain of salt because markets are emotionally-driven. There are so many moving parts involved that it’s impossible to simply use a single variable or even a handful of variables to tell you exactly when the good times will end.
The above introductory comments are edited excerpts from an article* by Ben Carlson (awealthofcommonsense.com) entitled What Stage of the Bull Market Are We In?.
The following article is presented courtesy of Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
Carlson goes on to say in further edited excerpts:
The most intelligent investors are the ones that are willing to admit that there is no certainty with market cycles. The pundits, portfolio managers and financial advisors with the most certainty are usually the ones you should listen to the least. It’s impossible to know exactly when a market cycle will end because the pendulum can swing too far in either direction.
We’ve been inundated with crash calls for the past 3-4 years. Much of this is because of the recency bias since we’ve witnessed two huge market crashes in the past decade and a half alone. Some are fear-mongering and ill-conceived but many have come across as intelligent arguments about why the bull market should have ended. It hasn’t mattered just yet.
Investors probably spend too much time trying to determine which year the current market set-up resembles. Is this 1999 all over again? Is it just like 2007? How about 1987? The fact is that investor actions are shaped by past experiences so 2015 is just like 2015. The only constant is that investor emotions shape market dynamics, especially over shorter time frames. These things are impossible to call with any precision. The best you can do is use the process of elimination to see where we aren’t.
We’re well past pessimism and skepticism (save for those that have been wrong the entire way up). Everyone realizes the improvement is underway.
- There’s no blood in the streets.
- There are no babies being thrown out with the bathwater.
- It’s not time to get greedy.
Does that mean it’s time to sell all of your stocks because we’ve seen huge gains over the past five years? [Not necessarily.] It all depends on your time horizon and what kind of investor you are. For some historical perspective see this chart of 30-year real returns from Jesse Livermore at Philosophical Economics:
Here’s Livermore’s observation** about investing right before the onset of the Great Depression: Surprisingly, a long-term investor that bought the market in November 1929, immediately after the first drop, did better than a long-term investor that bought the market in September 1980.
Patience can be a great equalizer of cycles in the financial markets. As Barry Ritholtz reminded his readers in the Washington Post recently – time, not timing, is key to investment success. The bull market will end at some point. Stocks will go down and we will eventually see a bear market. These things happen. When it happens is up to Mr. Market.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://awealthofcommonsense.com/stage-bull-market/ (Copyright © A Wealth of Common Sense)**http://www.philosophicaleconomics.com/2014/06/whos-afraid-of-1929/
Follow the munKNEE!
- Register for our Newsletter (sample here)
- Find us on Facebook
- Follow us on Twitter (#munknee)
Related Articles:
If the past long-term cyclical correlations between interest rates, equities, and commodities were to play out as they have done going back to the 1880s, U.S. stocks and interest rates should continue to rise as commodities either fall or underperform according to a 60-year cyclical pattern model referred to as The Market Map. Read More »
2. Yes, You Can Time the Market – Use These Trend Indicators
Remember, the trend is your friend and now you have an arsenal of such indicators to make an extensive and in-depth assessment of whether you should be buying or selling. If ever there was a “cut and save” investment advisory this article is it. Words: 1579 Read More
3. Cycle Analysis Suggests S&P 500 Has Topped & Will Decline To Major Low In 2016While the majority is looking at the Megaphone Pattern correction since the 2000 high and is expecting the market to go back to the lower trend line of this pattern and to make new lows, I think that it will not happen. The opinion of the majority can be used as a contrarian indicator. I think that a healthy correction in this new Secular Bull Market could push the Dow Jones to 12500-13500 (end of 2015 – half 2016) followed by a second leg up of this new Secular Bull Market. Read More »
4. Are We In Phase 3 – the Final Phase – of This Bull Market Yet?
Are we in the third phase of a bull market? Most who will read this article will immediately say “no” but isn’t that what was always believed during the “mania” phase of every previous bull market cycle? With the current bull market now stretching into its 7th year; it seems appropriate to review the three very distinct phases of historical bull market cycles. Read More »
5. 3 Historically Proven Market Indicators Warn of an Impending Market Top
It’s frustrating to see key stock indices keep pushing higher when historically proven market indicators are all warning of a crash ahead. Irrationality is exuberant to say the very least, and that’s why I believe this rally is counting its last days. Read More »
6. Time the Market With These Market Strength & Volatility Indicators
There are many indicators available that provide information on stock and index movement to help you time the market and make money. Market strength and volatility are two such categories of indicators and a description of six of them are described in this “cut and save” article. Read on! Words: 974 Read More »
7. Bubble-level Valuations Don’t Cause Bear Markets! These Factors Do
So much analysis we see and hear lately is concerned with whether the stock market is in a bubble or not. The truth of the matter, however, is that bear markets do not begin due to bubble-level valuations being reached and then bursting, but in anticipation of half a dozen mitigating factors as outlined in this article. Read More »
8. Ride the Market Waves With These 6 Momentum Indicators
It is hard to know what to buy or sell let alone just when to prudently do so. Thank goodness there are indicators available that provide information of stock and index movement of a more immediate nature to help you make such important decisions. This article describes the 6 most popular Momentum Indicators. If ever there was a “cut and save” investment advisory this is it! Words: 1234 Read More »
9. Its Time to Stop Trying to Time the Market & Start Playing the Percentages – Here’s Why
Remember the game Musical Chairs? It seems that investors on Wall Street have been playing this game recently, as more and more we are seeing signs that the current bull market may be reaching its final stages. Each new sign that appears represents just one more chair being taken away from the game. The question investors need to ask is “where will I be when the music stops”? Read More »
10. Bubbles: Doing NOTHING Is Often the BEST Response – Here’s Why
The benefits of being able to detect a bubble, when you are in its midst, rather than after it bursts, is that you may be able to protect yourself from its consequences. [Below are possible] mechanisms to detect bubbles, how well they work and what to do when you think a particular asset is in one. Read More »
11. The Best Stock Market Indicator – Ever
Below is a description of what I believe to be the best stock market indicator – ever. I am referring to the percentage of S&P 100 stocks above their 200 DMA which gives traders a clear early warning signal of impending serious market downturns and later safe re-entry points. Read More »
12. Don’t Try to Time the Market; Dollar-Cost Average Instead. Here’s Why
Everyone is worrying that we are at or near a market peak and this has investors extremely hesitant to buy stocks for fear of a big decline or perhaps even a crash. Obsessing over the risk of a crash, however, could lead to analysis paralysis but there is a basic investing strategy that can save investors from losing too much hair as they make the decision to buy stocks. It’s called dollar-cost averaging. Let me explain how it works and why it’s great for investors with long-term investing horizons. Read More »
