When should you sell?
I see many articles being published about the significant risks within our financial markets. And, most of those articles are written from the perspective that these risks “should” cause a market top. To this end, one recent article noted:
History shows you don't actually have to call the top because as Goldman noted this week, "selling after the first three months of the market peak would, on average, put an investor in the same position as one who sold equities three months before the peak"
Does the market present risk to investors?
But, here is the thing folks. Markets always have risk. The market had risks in 2009. Should we have sold then? The market had risks in 2011. Should we have sold then? The market had risks in 2015. Should we have sold then? And, the market has risk in 2017. Should we sell now? In other words, simply because there are risks in the market, does that mean we are within 3 months of a market top?
Yes, there is always risk in the financial markets. But, the thing about it is that these same article writers have been suggesting you sell not just within the last three months. Many of them have been consistently writing with an underlying theme suggesting you sell over the last 3 years or even more, citing many of the same risks inherent in the market.
Again, the market will ALWAYS have risk. That is the nature of the market. But, investors need an objective methodology to be able to determine where the larger rally structure will potentially top as compared to when we are simply in the heart of the major rally phase. Yet, most of these articles writers simply parrot the risks they read about in the market, and claim that it is time to head to the sidelines each week – some even several times a week – for the last several years.
As I have written before, as an investor, you will almost always lean toward a bearish bias of the equity market.
So, when many of you read articles that support your natural bearish bias, it strengthens your perspective that the market is certainly topping any day simply because others are able to point to risk within the market. Have you yet been introduced to the “wall of worry?”
Since January of 2016, many have been not only calling for the major market top, many have been looking for a market crash. Yet, we have looked at the market from a perspective that we are still within the heart of the major rally phase which will not likely slow until we attain the 2537-2611SPX region (which we have consistently published for the last 3 years). Ultimately, I still believe that the market can head towards the 2800-3000 region in the coming five years, but we will likely see a 15-20% correction begin within the next year or so before we see the final rally in the equity markets taking us toward that 3000 region, and the completion of the bull market which began in 2009.
Following exogenous causes will not likely make you money
As I have recently written in other articles, the geo-political and fundamental reasons being paraded before you have not had the effect upon the market that all these article writers have firmly believed they would. And, even though most disagree with my perspective, I think that anyone paying close attention to the market over the last several years and are willing to be honest with themselves will recognize that exogenous factors have not driven our stock market. Just look at the list of “reasons” so many have been expecting will cause the stock market to top:
Brexit – NOPE
Frexit – NOPE
Grexit - NOPE
Italian referendum - NOPE
Rise in interest rates - NOPE
Cessation of QE - NOPE
Terrorist attacks - NOPE
Crimea – NOPE
Trump – NOPE
Market not trading on fundamentals – NOPE
Low volatility – NOPE
Record high margin debt – NOPE
Hindenburg omens - NOPE
Syrian missile attack - NOPE
North Korea – NOPE
Yet, the market has clearly had other ideas. As you can see, none of these reasons have mattered, as the market has simply melted up towards our longer-term initial target of 2500SPX, which we pointed towards several years ago, despite much disbelief.
So, when someone says to those who have been wrong about their beliefs about the stock market “would you rather be right or would you rather make money,” I suggest you take a closer look at the question.
I believe the question is really presenting you with an opportunity to do a bit of introspection regarding the manner in which you make your determinations about where we are within the stock market cycle. The question is if you have been looking towards all those exogenous factors which have had no effect upon the market, which then caused you to be wrong about the market, or do you utilize another methodology which can provide you with a much better overall and accurate perspective of the stock market rally since 2009?
If you continue to analyze the markets through the lens of exogenous events and factors, and you have not yet recognized the folly in such perspective, then, yes, the question that should be asked of you is if you would rather be right or make money? Each of those exogenous factors present further risk to the market, so you are right about the risks. But, analyzing risk through such exogenous factors will usually not provide you with a money-making perspective, as the market will ignore those risks when we are still within the heart of a bull market rally.
So, for those that need the question explained in a clearer form, it would be better worded as “would you like to be right in recognizing the risks in the market, or would you rather make money in knowing when those risks will not have an effect upon the market?”
As I have noted so many times before, markets are not directed by exogenous events. Moreover, I have presented numerous market studies which support this perspective. Rather, markets are driven by investor sentiment. So, until you develop the tools to be able to interpret market sentiment as related to the overall structure of the stock market, being right will continue to be your focus, rather than making money.
The Market Pinball Wizard
As many of you may know, I am the founder of Elliottwavetrader, a well-known trading room approaching its 6th anniversary. Over the years we've heard from readers who are looking for a lighter, more focused version of our trading room. So, we have now opened a service within the SA Marketplace offerings entitled "The Market Pinball Wizard."
This service provides my directional bias on the S&P500 on a daily basis, along with several updates a week on the metals complex. I will also be providing my analysis on the USD and USO on the weekends, in addition to a metals and SPX update. This service is designed for readers who want a streamlined approach to staying a step ahead of the market, based upon our insights that have been honed over the years.
Since we opened our doors a month ago, we have become the 10th largest service out of the 147 Marketplace offerings. And, as some of our initial subscribers have noted:
“It has to be four years ago I was first reading an article from Avi Gilburt. To tell you the truth: I didn't like it. I was bullish for the metals at this time - he wasnt. :) However: He was right, it wasn't the time to be bullish on metals yet. So he deserved my respect. And I was following him over the years. And I think I am allowed to say: he is by far the best technical analyst I met in my 20 year investment career. So it was some kind of a no-brainer to give his new service Market Pinball Wizard a chance. And my high expectations have been exceeded. Either it comes to the metals or the S&P - his calls are accurate and his calls are correct most of the time. He will show you the market as it is and how it highly probable will act in the future. I might say the last four weeks with Avis Market Pinball Wizard opened my eyes. And gave me a new view on the market. Thank you for this, Avi. P.S. I apologize for any mistakes in this review as I am not native English.”
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Our Market Pinball Wizard members are now able to watch and hear me live as I share my charts, and are able to engage in a live conversation with me, as we launched our Weekly Webinar series last week! Starting after Labor Day, I began to host a member Webinar each Wednesday at 8:30 am Eastern, lasting 15-25 minutes. I am hoping that this time schedule would also allow those who are outside the US to be able to join.
Also, I have just posted webinars on basic Elliott Wave instruction in the Getting Started section. This should assist those unfamiliar with Elliott Wave to understand our analysis a bit better.
For those looking for accurate insight into various markets, including VIX/VXX, FOREX, Dow Jones, etc., I also HIGHLY suggest you read Michael Golembesky’s work on Seeking Alpha.
Lastly, it seems that Seeking Alpha has changed the way they tag articles. So, while my articles used to be sent out as an email to those that follow the metals complex, they are now only being sent out to those that have chosen to “follow” me. So, if you would like notification as to when my articles are published, please hit the button at the top to “follow” me. Thank you
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.