The first lesson I learned about investing at the age of 11 was to know which way the market was going. Is it going up or down. Sounds too simple but it’s the last thing most people consider. The buy and holders take it for granted. Its going up forever for them and the record of hat is pretty good if you don’t stray to far from the index.
However, for the sort of people that read articles like this, index tracking is not what they care to stick to. After all getting out near a top and back in near the bottom is extremely lucrative and long established readers here will see me pulling off this manoeuvre on several occasions over two decades.
So here we find ourselves in markets going wild. To me the Nasdaq has entered a bubble. Its early and will run, potentially a long way, but unless the current tends break, the bubble will build.
Here is a chart of the medium term which shows the clear trends.
This trend looks highly likely to continue and if you pull back you will see the Nasdaq ascend has almost magical stability. Afterall you need that to conjour up trillion dollar companies.
The Nasdaq is the king of markets and how it goes, so goes the world’s markets and the world economy to.
This chart doesn’t look like a bubble but you have to pull back a ways to see the big picture.
You can say that’s a contrived chart and you would be right. It isnt a prediction it’s a map and you can easily appreciate that if we are in a bubble the way this chart will develop.
The key is to remember if you see a bubble, there is a law. The law is ‘up like a rocket and down like a rock.’ A bubble feels great but the trap is you feel exultant on the way up, hold when the bubble halts, hold when it falls and then ride it all back down to the other side till all those loverly profits are gone. It’s a very painful ride. Its an expensive education one the a lot of people suffered in Bitoin last week when it fell out of bed on China trade war worries.
So lets look at Gold. It is in a bubble and that bubble could run and run and run. However here is a chart to consider.
So to me $5000 is the next stage of the Gold boom/bubble and if we get there I shall be evaluating whether is the top or quite possibly the half way mark. That how I at least trade bubbles. ‘Are we there yet?’ as a youngster might say.
‘Top or half way’ is a function of the random process of markets and there will be no telling untill we get there, if we get there, but you can see how the bubble is forming and you can optically see its potential.
So interesting time in the Nasdaq and precious metal with a lot of upside presenting itself. It’s a kind of hell for long term investors and of course a heaven for traders and for those of us somewhere between the two its bumpy times ahead but at least ones presenting opportunities galore.