The first lesson real lesson I learnt in investing and trading at the age of 11,the took me nnearly30 years to understand is: ‘The only thing you need to know about a market or asset is whether it is going up or down.’
It is such a truism that is laughable. However do you know which way the market is going? Do you even have a reasonable guess? Over what timeframe?
Suddenly its now such a silly statement, especially when theory says you cant know and where so many will throw there hands in the air and say ‘what do you mean’ or ‘I don’t care’ and often ‘I don’t know.’
If you don’t know which way the market is going why are you in it?
It is almost a truism to say ‘its hard to make money in the market if its going down, certainly its nigh on impossible if you are long like most. Its easy to make money when its going up and if you are sensible and sedate its almost impossible to lose, rather that it being almost possible to win when its going down.
So after the recent nasty dump in the market lets assess the direction.
As expected the impact of the US government shutdown and the disruption from the changes of monetary policy at the Fed have dissipated and the liquidity squeeze that was pressing on asset prices is dispersing, up goes the markets on most fronts.
Yet this is just the short term trading environment not the big picture that we should really only care about.
So lets look at the setup:
From this perspective its pretty clear that we ae in a bull market. There is no surprise there. We canalso see the detours when something unexpected and negative happens. When something bad and unpredictable happens the market dives and then as it works its way through the digestive tract of the market we get a recovery followed by s resumption of the very log term trend.
So lets look at that and as I believe if your cant draw the trend with afat sharpie, then don’t botter.
Now of course you can pull back further.
…and that is all you need to know, except one more thing.
That one more thing is, is there anything to derail this destiny?
The answer is, currently, no.
That is not to say the will no be, but the bottom line is, it will take something might to derail this market, so day to day, we should relax and keep an eye on the horizon and watch out for terrible and also fantastic events far ahead. In the short term you should embrace that the market is going up and that to stop that or even punch big holes in the ascent, it will take large and obvious events.
So here we are in the after party of the recent liquidity squeeze, with a highly likely strong bull period ahead. Pretty soon the latest doom-meme will fill the media but up the market will continue to grind. So, we have to remember stocks make us rich, media doom makes the media rich.
For now at least for a year or two the market is going up. Yes it will crash, it always does and we will try and avoid the crash. However the true disaster is to avoid the market, when it is clear that for all the bad news, financial crisis, plagues and wars, the market is going up and that is what I was told when I was a child was all you need to know.