Sentiment Speaks: How Do You Make Money With A Broken Clock?

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Includes: DDM, DIA, DOG, DXD, EEH, EPS, EQL, FEX, FWDD, HUSV, IVV, IWL, IWM, JHML, JKD, OTPIX, PSQ, QID, QLD, QQEW, QQQ, QQQE, QQXT, RSP, RWL, RWM, RYARX, RYRSX, SCHX, SDOW, SDS, SFLA, SH, SMLL, SPDN, SPLX, SPUU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SPY, SQQQ, SRTY, SSO, SYE, TNA, TQQQ, TWM, TZA, UDOW, UDPIX, UPRO, URTY, UWM, VFINX, VOO, VTWO, VV
by: Avi Gilburt

Summary

There are a lot of broken clocks in the stock market.

Investors need objective standards within analysis.

Upcoming expectations.

For those that are familiar with American football, you would likely understand the strategy that the team that controls the clock usually controls the game.

But what happens if the clock is broken and the game just keeps going and going and going? Well, it is no different than when an analyst makes a claim that the stock market is going to crash, makes this claim week after week after week, and does this for months or even years on end. Since there is no time limit to the game, eventually, this analyst can “win” the game.

This is what we call the “broken clock syndrome,” and we see this quite often in our financial markets. But the problem is that one cannot make money in the market with a broken clock. Remember what Ben Franklin once said: “Lost time is never found again.” So, the opportunity cost of following a broken clock is truly immeasurable.

But how do you know that you are using a broken clock?

This is where you must demand objective standards from any analyst you read. So, while I still see articles looking for the financial markets to blow up, and others pointing to various factors which will kill the bull market, and even others saying “bye-bye” to the bull market and hello to the bear market, this is no different than what we have been reading from many analysts for years now. Yet, have you ever noted that none of them will provide you with an objective standard through which you can determine if their analysis will be correct at any point before 5 years from when they make their claims?

Several years ago, when I was publishing my articles claiming that we will see a rally from the 1,800 region in the SPX to 2,600+ in the SPX, I would see many comments disagreeing with my perspective, as most market participants at the time could not fathom such a rally.

In fact, I remember one such commenter who spoke with a certain amount of authority and continually claimed (from 2013) that we are entering a major deflationary period which would cause our stock market to crash. He had many of those reading his comments completely convinced of his perspective.

The manner in which I challenged him was to simply ask him at what point would he know his analysis was wrong? Would it be if we rallied over 1900? Over 2000? Over 2100? Yet, he constantly refused to provide me with any objective standards to suggest he was wrong in his expectations. All he claimed was they there was no way that the market will rally up to my target.

Are you starting to see what I mean about needing objective standards? Yet, very few analysts utilize analysis methodologies that can provide such objective standards. That would classify their analysis as being akin to simply guessing without knowing when they are wrong.

Remember, markets are non-linear in nature, and will move up and down. As trees do not grow to the sky, markets do not continue up indefinitely. We will always have corrections. So, if an analyst makes a claim that the market is going to drop by 50%, it really is more important to know if the market will correct from where we currently reside or if it will correct after a 100% rally. If the analyst claims weekly that the market will correct 50% during the period of time in which the market rallies for 100%, then the analyst is not providing you with any guidance whatsoever. This is basically what we have seen from many analysts over the last 3-5 years.

I would suggest you begin to demand objective standards from the analysis you read, rather than simply seek confirmation of your own bearish tendencies.

So, allow me to provide you my analysis for the upcoming week, with objective standards, as I often do. As long as the market remains over our upper support of 2700SPX, I am looking for the market to rally up towards the 2760SPX region. But the next rally I expect (should we see it in the coming week) will likely set us up for another larger degree decline, with an initial target in the 2650SPX region. Ultimately, I expect the market to test the 2600-2650SPX region again (and possibly even lower) before we begin the rally I expect over 3000.

For those of you that have been following me closely, you would know that I have been expecting the market to rally over 3000 after this correction runs its course. And, if the market should strongly move through the 2823SPX region before another larger degree downside structure takes hold, then this is my objective standard that suggests the market is likely already heading up over 3000 earlier than I had initially expected.

Housekeeping Matter

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Memorial Day Message

This weekend, I took the liberty of watching the movie “Ike: Countdown To D-day.” Watching this movie struck an emotional chord within me on this Memorial Day weekend, which we each should feel to the depths of our being living privileged to be free men and women today. We should each feel an immense and immeasurable sense of gratitude to the men and women of our military, along with their families who sacrifice so much alongside them.

The sacrifices made by the individuals on that day of June 6th, 1944, and throughout the entire war, and throughout all of American history, have indebted each and every one of us to them and their families in a way we cannot and will not ever be able to repay. The sacrifice made by them, their mothers, fathers, brothers, sisters and children is something we can never fully appreciate, especially during the time in history in which we are all now blessed to live due to their selflessness.

As I now am moved to write this heartfelt message, with tears streaming down my cheeks, I recognize that this is but only a small token of appreciation I may be showing. To all those within the reaches of my words who have served in our armed forces or who have lost loved ones who have served in our armed forces, please accept my and my family’s deepest and most earnest felt gratitude for your service to our country and, indeed, to all of mankind. It is due to your sacrifice that we proudly stand today and proclaim “let freedom ring.” God bless you, your families, and the United States of America.

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. I have no business relationship with any company whose stock is mentioned in this article.