MarketMap 2018 Issue #3

Posted by on Feb 3, 2018 in Be a Trader | 0 comments

January 31, 2018

“Most investors will concede that the most difficult part of managing a portfolio of stocks is identifying the formation of a major market top before it is too late. This is undoubtedly due to the universal enthusiasm for stocks, and generally positive economic news that usually dominates investor psychology at such times. But, the warning signs are nevertheless present for those willing and able to see them.”

Paul F. Desmond Lowry Research Corporation

Forecast are mostly about sales/marketing; they make a market. From a reasonable point of view, they point out opportunity upon which investors and traders apply a strategy to take advantage.

A forecast is applied to risk management as well. Yet I heard chief market strategies from BOA Merrill Lynch point out in a public financial news panel interview that the last year of a bull market is usually the best year. She pointed to 1999 as an example. Her logic because the best return year of the bull is the last year you don’t want to miss it.

There are many flaws in this logic; the main one is the gains of 1999 were wiped out in the first two months of 2000, not to mention the follow through decline into 2001-02.

Plus, it is clear in retrospect that ’99 was the last, but how does she know 2018 will be the last year of the bull, while 2017 with all of it’s over the moon stats is likely the best, hence the last year of the cyclical bull. Or maybe that was a Freudian slip.

In any event, a forecast is dangerous they make a market, they cause people to act on the advisory, thus confusing it with an executable strategy. Plus entry-level types and transactional agents get a brain cramp attempting to discern the difference between the two. But from a sales/marketing point of view, it is dangerous as well being on the left-hand side of a peak; it gives the appearance of being wrong; even when the corrective cycle vindicates the early risk management.

If the forecast is on the right-hand side of the peak, it looks too easy and the public losses interest because they did not nail top tick and they feel that they could-of-would-of-should-of which is added to their woe-is-me of missed opportunities.

Our Change of Trend (COT) table

contains the dates for expected reversals of the trend. Obviously, this is always contingent on the direction of the trend going into that date. We discovered this method in the late 90s and was one of the first to engage the public with the simple idea of six types of COTs. Today I hear many of the cycle analyst using my lexicon.

The time window with the greatest amount of clustering from a wide variety of cycle analysis is

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