Bull-Bear Markets reward Astute Investors & Punish the Foolish ones
No one can claim to have mastered the markets fully and anyone that does lay claim to such a title should be avoided like the plague. For example, after QE all the rules changed and many time-tested indicators simply ceased to work because the operating environment had changed forever. The markets were suddenly hit with a force that they had never been hit with before. A fed that was determined to destroy any shred of free market forces left in the market. This surprised everyone, and it even caught us off guard initially. Many so-called experts refuse to accept that they made a mistake or could be wrong.
Admit that you made a mistake and then make sure you never repeat it again
There is nothing wrong with admitting you made a mistake provided you learn from your errors; doing the same thing over and over again, and expecting a new outcome is the definition of insanity. This is what so many bearish experts and gutless bullish experts have failed to understand and that is why they continue to look for points to short this market. How about a change in perspective? What if the current level only represents half the full potential of this bull market? Then these guys could at least lock in some profits. Yes eventually they will be right and the market will crash but by then they will be broke. Any bear that acted on the nonsense they spewed out for the past would have lost all his money several times over by now.
Adapt or die if you plan on putting money in the markets
For example, once we spotted the effects QE was having on our indicator and on many other reliable patterns (some patterns were over 100 years old and had never failed), we knew we had to adapt or die, we chose to adapt. We put an inordinate amount of time and resources into developing the trend indicator and in the process, we threw away almost every other tool we had used for years on end. This is why you hardly ever hear us talk about market internals or market volume or hidden patterns (some of which are very old) because most of that stuff is a waste of time in the current environment. This data is only useful if it’s utilized in a different manner. We will expand on this concept in a future article.
Crowd Psychology implicitly states one should never follow the Masses
These exceprts from past market updates illustraate the concept of mass psychology in real time. Never follow the crowd unless you suffer from the secret desire to lose syndrome.
Logic has no place in this market; so focus on the emotional state of the crowd. Until the masses turn bullish, the very most we can expect from this market is a strong correction which will prove to be a buying opportunity. In the short term, the path of least resistance is still up. Market Update August 18, 2017
We would like to state that it now appears that the Dow will trade past 20K and could surge well over 25K. However, let’s focus on 20K and 21K for now. Market Update Nov 6, 2016
People expect the market to crash as Market sentiment is rather negative and hence it won’t. Our trend indicator is positive, and we have not seen a market crash when this indicator is bullish; that’s it. Market Update June 2, 2016
From a long-term perspective, we see nothing to worry about; everything is taking place as envisioned. The long-term trend is still up. Wait for some more blood to be spilt on the streets before taking larger bites. Market Update July 17, 2015
Don’t let arrogance or fear rule you when it comes to the markets, both are deadly and the result is always a loss
The markets are nothing but a representation of the worst characteristics of human nature. The markets are driven by emotions and psychology is the study of emotions; mass psychology is the study of mass emotions. Hence, the first thing you need to master is control over your emotions. Yes it is easier said than done, but if you don’t try you will remain in the same position; practice makes perfect, so start practising.
For most people, today is the tomorrow they promised they would seek to change yesterday, but instead find themselves repeating yesterday’s chant today. Tomorrow begins today; otherwise, it will also remain something that is beyond your reach.
The masses are not destined to win and an examination of history clearly validates this point. 2015 was wild, exciting and jarring in many aspects. The same proved to be true of 2016 and to a slightly less degree 2017. 2018 will prove to be even more erratic for those who allow their emotions to do the talking.
1st published at the Tactical Investor