HALFWAY HOME HAPPENINGS TO BUILD ON
January has come and gone with stock market performance taking even more of a psychological toll on some traders than an actual financial one. A “PLUNGE” as some describe it overstates a total 5% drop from the all-time top as things stand now.
Typically, a 10% stock market decline is mathematically and historically in the cards each year…when that happens the naysayers and doomsdayers shout from the rooftops that it is different this time and the bull is dead.
A key is to focus on percentages not points after a 100% stock surge post-2020 Covid lows. A 500 point move in the DOW, not the pros market barometer because it is just 30 stocks and price-weighted, is now just over 1% at the lofty 35,000 level.
That day will come, and the opportunity to profit will shift to the downside. You can make money in any and all market conditions, but trying to call that momentous momentum turn has been fruitless for more than a decade. The only profitable and prosperous bear market trader has taken profit immediately on declines because each and every selloff quickly saw a climb to new record highs.
EVERY TIME IN MARKET HISTORY stock losses have been erased as buyers stepped up to find bargains!!!
As the son of a clinical psychologist, which obviously seeps into my trading mentality, it has proven over and over that when public sentiment gets overwhelming on one side…it is usually wrong.
Recently, I’ve received phone calls from my concerned mother, caution from local businesses, like one brewery owner, and even my boat builder is expecting a slowdown! This all stems from a three-week unwind of a seemingly straight-up stock market? They lack perspective on the opportunities to buy low.
Markets are not good or bad, they just offer opportunity – and in the present case, endless profit plays in any direction for those with the skills for success.
The foundation base is now in place, as stated in the last two posts here, an S&P 500 halfway snap back attack above 4500 is significant and suggests a full “V” recovery rally as in the past. Not to say it is straight-up from here but building on the reversal last week and holding the midpoint pivot on a weekly basis should turn a lot of frowns upside down.
The price reaction has been positive while the sentiment shift has been simply slow to keep pace. Unfortunately, human nature has people ignore stocks they want when they are at a discount and only jump on board after the risk/reward is not as favorable.
The fear factor $VIX mole that popped up out of the hole has been whacked again below the halfway pivot from the June $14 to January $39 swing surge.
Nothing is new here. Reflation and rate rises have been bloviated for months and months not sneaking up on anyone. Earnings have continually beat expectations and remain impressive as the true evaluator of corporate performance.
A glass half full attitude has done wonders for portfolios and this time doesn’t seem any different.