CRInvestor

The current US stock market - A very risk place indeed

AMEX:SPY   SPDR S&P 500 ETF
464 10 12
Hello all,
on the heels of my most recent published report (A word of caution to investors - deflation is getting serious) I thought it would be of benefit to take a good look at the stock market and really try and quantify the risks to investors at the moment.
The problem with the stock market is that it is a business where when prices go 'on sale' no one wants to buy. Conversely, when prices are zooming higher, no one wants to sell. This flawed logic has caused many a lot of pain and is in my opinion the number one problem with 'investing'. Investors, in my opinion, last got their 'buy' signal way back in 2011 (See RI's S&P 500             Blog for more on that), yet sadly we will probably head into a euphoric buyer mania before the end of this current bull run. As traders we call it 'FOMO' or Fear of Missing Out, and is sadly a primary component of our human psych.
The public always buys at the top and sells at the bottom. In very opposite fashion, institutions often do the exact opposite (remember the smart money always makes money!). If I ask myself, if I was an institution and I was going to buy, about where would I get interested? The answer to the question is rather startling and in itself should be a big cautionary note. On the conservative side, if we top out within the next 5% (ie reversing at the 1.618 'golden ratio' fib) then the buying zone is 50% lower. Interestingly, if the market goes a little nutso here and rallies all the way up to the 200% extension target then again, the buying zone is 50% lower. Either way, institutions (in my opinion) have absolutely no interest at buying current levels before at least some sort of consolation/correction. Interestingly too, the 2007-2009 correction just so happened to be about 50%....hmmmm
Couple this message, with my previous publication and we got the makings of a serious problem here going forward (or an opportunity, depending on how you late at it). While it is far too early to be calling 'tops' in equities on a weekly basis, we should at the very least appreciate the 'riskiness' of stock ownership in general. At the same time, it is simply far too late to get in on this bull and 'investors' would be far netter served with their money in cash (remember the DXY             bull market) and only consider stock market participation after some sort of cleanup phase.
Well that is my cautionary note for you today Yes, it appears stocks have some gas in the tank. A significant harmonic object is fast approaching and I don't see any reason why that level won't be hit. If you are trading off the lower time frames then that is one thing. However, if you are a buy-and-hold investor, this is not the time to be aggressive.
Cheers all and good luck in following those trading plans,
Brian
aka The Rational Investor
p.s. if you are serious about working on your trading skills and may actually consider trading for a living, please take a moment and visit our Bitcoin related trading site at http://www.therationalinvestor.co Along with regular blog posts and member videos, we run a school to teach aspiring traders the basic essentials to trading for profit over the long term. From risk management, to strategic planning to crafting a personalized trading plan, our 12 week program's aim is to give you the tools needed to survive and prosper over the long term. While the school has a bitcoin theme, all principles of trading are applicable across all asset types and classes...a good buy is a good buy...

grahvity
2 years ago
+1 for therationalinvestor.co and the tutorials contained within.
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yomofoV PRO
2 years ago
what does it mean "there is unresolved business here"?
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CRInvestor PRO yomofoV
2 years ago
it means there is a gap on the charts and at some point in the future I believe price will have to go down and fill the gap
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Good Article

Thou, Not so sure we can reach the 1.618 mark you point out. Close enough to call it resistance. I'm betting Puts on AA first and maybe next KO. In the month of October Banks will probably prop us up for the second week, third week Tech might keep it sideways, and after that all hell breaks loose.
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play4trade QuantitativeExhaustion
2 years ago
Too many lines my friends... You can't even see the candles... Focus on price action... I was very bearish going into this week... but they are setting up for higher prices... BIG TIME FRAME is always in control... it takes time to work off this momentum... Look at every major capitulation... Distribution always preceded it. ALWAYS... it's only risky if you don't understand price action... Things just seem to happen for no reason...
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CRInvestor PRO play4trade
2 years ago
where do people like you come from....write your own darn article, don't waist everyone's time with what you think I should be doing...geeeesh
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play4trade CRInvestor
2 years ago
I'm trying to help you out buddy. You are going to miss out on a lesson of a lifetime.... Suit it yourself...
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CRInvestor PRO play4trade
2 years ago
lol...no lessons needed thanks, as I said before - build a following and preach to your own choir...lol
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play4trade CRInvestor
2 years ago
Ok, so where is SPY going next week? Any ideas? Or just out here speculating like 99% of people? Got to understand price action if you want to make big money... But if you are happy guessing with fibs/MA'/ trendlines' suit and barely making penny's good luck... Most people trade like that and get no where... People are impressed because they think all the lines actually tells a story... Less than 1% of people who trade truly understand how market operates... Good Luck
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Holy crap, this target was spot on! Golden Ratio target hit heading into end of 2014....damn
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