I really think we likely saw a long term top in equities and a major turning point in the various trends that we had since 2009 until recently. I copied the pattern from the high in the year 2000, to give us an idea of what to expect, since that was the last time a yearly timeframe Time@mode pattern concluded, I think it can serve as a guide from here onwards. Publishing this one for posterity, it's interesting that we already have a Dot Com bubble like chart in ARKK monthly, definitely very critical to figure out if we already topped, as per the yearly, or if we get a different bear market pattern next. In my opinion, the massive excess we saw since 2020 post COVID, with increased retail participation is akin to the frenzy that started in the year 1998, and topped by 2000, which would fit today being equivalent to that period.
I will try to navigate this period profitably, my strategy is to have a long/short portfolio, buying interesting bullish setups in stocks with lower valuations, commodities related positions, and defensive names, all that have historically fared well during yearly trend expirations when bear markets and long term sideways consolidations started, like between 2000 and 2013, or before, during the 70s. I also short overvalued names where I perceive that the story driving them is exhausted, and are rolling over, with insane valuations and market participants complacent and buying option premium on the way down...while shorting options against my short positions. I manage risk carefully, and have split my portfolio in two: one trading account with 25% of my firepower, and 75% in a long term account where I have only long term long positions, no leverage, and try to sell calls to generate income while holding my long term bets.
Best of luck, let's hope we get further clarity over time. Fitting this scenario would result in a tricky period unfolding for months, but eventually we will get a really steady decline to trade more aggressively on the short side. Patience will reward us here, can't take big risks and expect to make money as a bear simply holding random bearish entries.
Cheers,
Ivan.
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Tradingview has a bug that messed with the scale of the overlay... This is how it should look:
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Matching really well here, one more swing up then we have enough time for a monthly down trend signal to pop over time...Most commodities point to tops near August for them, which could be when inflation peaks and bonds start to rebound and we get a recession. Demand has been slowing down, there's some data indicating that's the case, but not yet widespread...TIcking time bomb.
Nice description and match in the early stages to the (dot com, high tech) bubble of 1999-2000. So if I understand, you will be : - 75% positioned with correction-sturdy longs, which you will carry down as SP500 trends to 3400 based on the 2000 crash (as per second graph). - 25% (shorts, puts) for the main part of the anticipated bear market lasting to next fall (>20% down from Nov2021 high, but not projected to be a crash >50% down) Use of calls on long longs for revenues : nice. Your overall approach leaves you with some flexibility, not as much as cash, but then again not as vulnerable to inflation depending on the longs.
IvanLabrie
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@Bill_Howell, I am trading more actively using shorter term signals in the 25% chunk, whereas the 75% account is long term positions only. The pricing power of the names in the long term basket, and valuations and stable earnings make up for inflation risks, and should see some bid in a long term bear market. For instance, BDX, MKC, and energy names have historically fared well during bearish periods of consolidation. The complicated part where short term trend analysis is important is when picking which calls to short against stock, when to roll if needed, etc. That part isn't easy to explain, but it makes a big difference vs returns from simply selling calls constantly. (SPX vs XLE, BDX, NDX) Back to the shorter term active trading account: I trade more speculative positions, use option strategies to position for earnings, and have a long/short basket of 'bear market proof' longs vs a basket of meme stocks with insane premiums. I sell puts against the shorts, and calls against the longs. That's my base strategy here, if my view is validated over time regarding a bear market starting in the long term.
Bill_Howell
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@IvanLabrie, Thanks for the detailed explanations. I like your approach - mix of trade and long term. A bit scary for me long term if you are expecting a major market reset, with all valuations so high. I looked closely at some financial institutions, given strong value retention and prospect for rising rates. But those aren't exactly cheap either, even compared to 2018-2020 pre-covid-bear. All best.
IvanLabrie
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@Bill_Howell, thanks Bill, there's a chasm between some valuations for sure. Worth researching what to hold as cash alternatives...Cheers!
alenotr43
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they all starting new leg for ath better talk 5000-6000 :D check microsoft and apple they will talk to you
brgod
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When accounting for CPI or Money Supply or Median House Price it seems like the SP should have alot more room to run to the upside. The SP500 spend 10+ years with an all time high between 1500-1600. a 5% return since 2000 seems smallish to me.
- 75% positioned with correction-sturdy longs, which you will carry down as SP500 trends to 3400 based on the 2000 crash (as per second graph).
- 25% (shorts, puts) for the main part of the anticipated bear market lasting to next fall (>20% down from Nov2021 high, but not projected to be a crash >50% down)
Use of calls on long longs for revenues : nice. Your overall approach leaves you with some flexibility, not as much as cash, but then again not as vulnerable to inflation depending on the longs.