Wishing you all a wonderful new year!! Let’s make 2023 a banner year!!!

purpose

 “a stable and generalized intention to accomplish something that is at once personally meaningful and at the same time leads to productive engagement with some aspect of the world beyond the self.” 

Based on history, US recession coming very soon.

"The Philly Fed State Coincident Index fell in 22 states in October. When the average 1-month index has fallen to 50% or less, the economy is usually at or near the early stages of a recession."

Today's surge on CPI, while strong enough to carry a little bit further in the near term, is a junk off the low rally led by the beaten down past leaders that are in strong down trends. To enjoy a sustainable new bull market, we need fresh new shares leading the charge.

long - way to go-)

"Traders are independent thinkers. They’re loners, they’re the lone wolfs out there. They do their own research, they eat their own cooking. They don’t have to rely on anybody else for anything. They don’t take their losses personally. They learn from them. They understand that there’s randomness. They understand that there’s good luck and bad luck, good timing and bad timing. And there’s self-sufficient."

There are currently less than 200 stocks in confirmed Stage 2 uptrends, so there's still work to do in establishing solid participation to fuel a sustainable new uptrend but keep in mind, the best stocks bottom before the indexes.

"Context is King" - In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

I'd suggest you make self-to-self comparison to measure progress.

As of end of September 2022. 

"in the multi-strategy and fixed-income categories, according to Peter Laurelli, global head of research at eVestment. The ten largest multi-strategy funds lost 2.1 percent year-to-date, significantly better than the entire group’s loss of 3.4 percent. The ten largest fixed-income funds lost an average of 1.5 percent in 2022"

"All life is an experiment. The more experiments you make the better."

"when the cops raid the brothel, even the piano player gets arrested"

"The market is the sum total of the wisdom and the ignorance of all of those who deal in it and we dare not argue with the market’s wisdom. If we learn nothing more than this we’ve learned indeed."

 

"Velocity begets more velocity."

During the bear markets of 2000-2003 and 2007-2008 the Fed was lowering rates. Now in this 2022 bear market the Fed is raising rates and that's the major difference that has the potential to create all sorts of unintended and unexpected consequences.

Historically speaking..........

"The weakest time of the year for the S&P 500 has been from September 6 to October 25."

Under most circumstances, the markets will be either readable or reliable.

"We registered blow off volume around the lows (1) then got some nice upside confirmation volume during the subsequent rally (2) however, better than 10:1 up vs. down volume came back into the market last week (3); an indication that institutions were using strength to sell into."

"During the 2000 bear market the NASDAQ rallied 40%, 28%, 41%, 50% and 36%." All of them nothing more than bear market rallies with very few stock working from breakouts.

Markets trying to rally but breadth pretty crummy. Been a while since we've seen that.

 to help you visualize

Another thought-provoking chart.

 

 

                                                                

If the economy avoids a recession, then the current decline is approaching the avrage for both time and price.

 

As ugly as the market has been, at this stage it's time to get off the indexes and focus on leading stocks. The best names ALWAYS bottom BEFORE the averages. Now is the time to START looking for names that will lead the next bull market which will for certain to follow this correction.

"Lies, damned lies, and statistics"

Going back to 1932 there were three other times when the market started the year down more than 20% and in each of the subseqent years the market closed higher than it had ended in June. Like 1962.
 

What will be the new leadership ?

"You're not trying to be the first one on board; rather, you're looking for where momentum is picking up and the risk of failure is relatively low."

This is a bounce in a bear market and it can last for a few days to as long as a few weeks. Whenever you have durration corrections in bear markets, it takes long to bottom. Not entering rrsp now as this could fail Better to wait for confirmation. Compound from a higher equity base.

Don't forget to enjoy the ride.

 

Put things into perspective, we are only thirteen days off the bear market lows.

bears are out and feeding

The key now is how well and how many stocks can hold up while the market sells off.

What is your edge? It's your ability to apply your strategy and make it work for you. You are your real edge.

You have to have a profitable method and a consistant aproach to the markets, but you know you are your real edge and that first and foremost you have to take care of yourself. 

In your business/trading plan:"Include a provision that will keep you from trading if outside circumstances create an unusual stress", such as health, divorce, or a major move. You might as well just write check out of your trading account and kiss it goodbuy. This is a hard thing to recognize before it is to late. People LOSE money during times of ten major stresses: death, taxes, divorce, moving, health.....you get the point. Trading is a performance oriented discipline. If you can't perform well, cancel the show..... If a tenis player severly sprains his ankle, he cancels the match. Why do damage to your ratings? Why mar your statistical record with sub-optimal performance? Markets will always be there!

The market will tell you when a bear market phase is over, because stocks will start putting in higher lows, stocks will make new 52-week highs, and stocks will stop making new 52-week lows.

"Stock prices move on the basis of what people think. Ultimately, it's perception that motivates investors and creates price movement."

 

The big "if" is whether or not we're going to go into a recession. Why? Because with recession there is more work to do than without.

 

'For those of you that are young, life is short, pursue your dreams. For those who are older, life is even shorter... pursue your dreams even faster'

 bouncy

Here is the bounce, we'll see if this one can hold.

It will take more than just a bounce to establish a reliable bottom.

"With the market in correction this is where the willingness to exercise "sit out power" is the key. Remember, while you do nothing... less experienced, lesser disciplined and less skilled investors lay the groundwork for your success. They build the bases, I buy the breakouts."

 I'm in it for the long haul

Its just in my IRA (sure don't worry about your retirement..) Its a good company This is overdone The market is wrong They always come back do you think like this? Get help! 1-800-DONTBUYSTOCKSINDOWNTRENDS

Remember; If you lose 50%, you need 100% to break even.

Remember, bear markets lead to bull markets. But you must survive.

Start today with gratitude.

It's very important to uderstand that bottoming is a process, takes time, and that the old leaders may not lead the new bull market.

 

Judge no one. Just improve yourself.

 

We raise by lifting others.

"With the market in correction this is where the willingness to exercise "sit out power" is the key. Remember, while you do nothing... less experienced, lesser disciplined and less skilled investors lay the groundwork for your success. They build the bases, I buy the breakouts."

There is no shame in losing money on a trade, but to hold on to a loss and let it get bigger and bigger, or even worse, to add more is amateurish and self destructive.

Good things are coming, just keep moving forward.

 

 

AARK - bear market rally will be fun.......... and good for the nimble traders.

                                      

 

"Markets"

Unemployment is plumbing new lows at a mere 3.6%, right up against the pre-pandemic 50-year low achieved in Feb-2020 of 3.5%. History shows that such drops which may fall even lower always precede spikes in unemployment due to recessions. Such spikes can occur within a few months of unemployment lows. While deep supply chain disruptions remain due to container ships stuck in transit, there is also a massive supply problem in labor because 1.6 million fewer people are working compared to pre-C19 in February 2020. We are witnessing a return to at least 1970s style stagflation. It's going to take more than several rate hikes, perhaps at least a 4-5% increase in the fed funds rate, to dent inflation in the housing market and other major sources. And stock markets will not stand for it which will force the Fed's hand to adopting dovish policies once again.

The CPI number Y/Y came in 0.1% above expectations at 8.5%, though core came in 0.1% below expectations at 6.5%, suggesting to some that inflation may have peaked. The PPI came in higher than expectations across the board. The problem is inflation has notoriously long tails of typically at least 2 years, so even if inflation does not increase from here, it can stay at the current levels for the next couple of years which would be disastrous to the economy and to savers.

Further, while many commentators with huge followings keep saying stock and crypto markets can now rally because everything is priced in, they have been putting up this prayer since the start of this year, yet here we are, still in a long term downtrend, due to the tightening of rates, as stock and crypto markets which bounced hard from oversold conditions are starting to roll over again.

The CME Fed Futures has priced in a 50 bps rate hike for their next two meetings, May 4 and June 15. This would bring the fed funds rate up to 125 to 150 bps from its current 25 to 50 bps. Will the U.S. stock market be able to stay above its -20% peak-to-trough threshold which has historically since 2009 been the point where the Fed Chair cries "UNCLE!". Thus expect inflation overall to continue to accelerate over time if hundreds of years of history are any guide along with markets trending lower until Powell reverses his hawkish position.

Trading is a matter of making trade-offs. Use wider stops – and increase the win rate in exchange for larger drawdowns. Name the tactical change to a trading program and there will be trade-offs. My trading regime is filled with trade-offs. A high Gain-to-Pain ratio and Profit Factor are my goals. I give up absolute profitability as a trade-off. Aggressively I protect trading capital. I cut losses very quickly – this protects capital with the tradeoff of being stopped out of a lot of trades that subsequently become winners.

Trade-offs. There are always trade-offs. There is NO way to optimize for all the outcomes you want.  The wrinkle in playing the trade-off game is that there are always unintended consequences. Sometimes the unintended consequences are good news, more often they are unwelcome. Then, in the process of addressing the unintended consequences, new trade-offs occur.

"FYI"

Since the Fed minutes delivered on Apr 6, the CME Fed Fund Futures is now pricing in 9 more 25 bps rate hikes this year with a 77% chance of a 50 bps hike at their next meeting in May. The Fed indicated it plans to run off $60 billion in Treasurys and $35 billion in mortgage backed securities each month, above estimates of $70-90 billion in total, but could work its way up to its target "over a period of 3 months or modestly longer if market conditions warrant." All of the above suggest the Fed will not be reversing their hawkish stance anytime soon, so if you are exposed to the long side of stocks or cryptocurrencies, keep your stops tight.

Markets are always the same, they always change.

The only constant when it comes to markets is change. Quantitative easing, or QE, was one of a number of material changes introduced to the markets which destroyed a number of variables that had once carried predictive value. Thus being able to pivot in a timely manner has always been critical to the few successful investors who have remained successful.  If we analyze a century worth of data, we will see that all crises were followed by major averages bottoming then moving higher which brought major buying opportunities.

Note: While markets have always recovered, it can take many years, sometimes decades, to breakeven if you bought at a peak. 

"The greatest of all success rules is this: do unto others as you would if you were the others."

The Golden Rule is more than a principle of ethical behavior; it is a dynamic force that can work good in the lives of untold numbers of people. When you make it a practice to treat others as though you were the others, you spread goodwill among people who, in turn, may be moved to do the same. By their actions, they influence still more people, who generate goodwill among even more people. This force for goodwill increases exponentially and will return to you from totally new sources. The benefit you receive from a good deed performed today by a total stranger may have been a chain reaction from long ago when you observed the Golden Rule in your own dealings with another.

Bitcoin - an inflection point.

Now, bulls are thinking did we buy the top, and bears are thinking if they should sell it here. Enjoy the ride!

Fishing.

 I often forget how important the empty days are, how important it may be sometimes not to expect to produce anything, even a few lines in a journal. A day when one has not pushed oneself to the limit seems a damaged, damaging day, a sinful day. Not so! The most valuable thing one can do for the psyche, from time to time, is to let it rest, let it be, wander, live in the everchanging moment of eternal Now.

Debt will continue to be sold until reaches a level that is considered sustainable. That is a long way from here. Enjoy the ride!

"Beware of him who tries to poison your mind against another under the pretense of helping you. The chances are a thousand to one he is trying to help himself."

 South African poet and painter Breyten Breytenback tells of a black man named Freedom who was the property of a one-legged slave owner in the days before the abolition of slavery. Whenever the owner bought a new pair of shoes, he gave the left one, which he couldn’t use, to Freedom. Eventually, wearing two left shoes deformed Freedom’s right foot, and he was permanently crippled by the “generosity” of his master. Don’t be fooled by people who attempt to further their own interests under the guise of helping you. Listen to advice from others, thank them for their interest, and make up your own mind about what is best. Follow their advice if it fits with your plan for your life, but don’t hesitate to discard it if it doesn’t. In all the world, there is only one individual who knows what is best for you, and that person is you.

The most important decision you make is to be in a good mood.

 

Tumbling stock markets show that investors are increasingly concerned about Fed rate hikes, the war, and rising energy prices.

Since 1970, each time the oil price increased by close to 100% from a year ago, the U.S. economy entered a recession. However, oil prices are now less of a burden compared to the past, as the U.S. is a net exporter of oil. Thus, rising prices do not necessarily point to a recession ahead.

Odds of a recession have certainly increased in recent weeks and any further escalation of the war between Russia and Ukraine would represent a significant drag on growth. For investors it makes sense to remain defensive. Not being fully invested in stocks, holding significant amounts of cash, keeping gold as the ultimate safe haven, and adding oil stocks as a geopolitical hedge should help to reduce portfolio volatility in uncertain times.

 

When this goes, the game is over!