It's happening again. As the market rises up for the fourth time in 2022, there are calls for everyone to get into the pool. The problem is, things are still floating in that pool that can make you ill, or cost you plenty of your capital. They tell you not to remember those prior three times the market rallied in this bear market, because 'this time will be different'.
Well, like you, I prefer to let the market direct my actions, and that usually works out best.
We bear witness to a strong 12% rally since the start of October. That is impressive, but not nearly as strong as the March buyer's storm nor the June/August monster rally that surged the indexes about 20% in six weeks. Why did those rallies fizzle out?
The Fed and an aggressive hawkish policy stopped those rallies in their tracks. At the time there was little chance the rate hikes were ending regardless of the rhetoric.
This time around you had a deep oversold condition and a slightly lower inflation reading that encouraged equity buyers to pile on, and that they are doing. We are certainly seeing a change in character for the indicators. MACD is on a buy signal, the intermediate signals (weekly) from the money flow, rate of change and stochastics are all turning bullish.
But remember, the same turns happened in the summer - before the market was crushed. Just be aware.
Why do we not listen to those who supposedly have more knowledge than us? Basically they don't, and guessing wild outcomes seems to get everyone's attention. But nobody seems to remember the bad calls, unless you're putting your own capital on the line and lose money.
Or perhaps you'll get a shallow 'oops, I'm sorry I was wrong'. That doesn't cut it in my book, so I have very little faith and trust in anyone's point of view, and prefer to let the market tell me how to proceed.
