Why a Chartists Forum in a Generational weblog?
So that one day we will buy back into equities at near to the bottom of the market. Let me elaborate:
I agree with the views expressed by StilesBC. If you want to do short to medium term investing you need stop losses in place because you are not going to be right all the time. If you can be right 75% of the time, and as long as you are not greedy, the profits will mount steadily.
But why charts in a generational context?
Because charts help us to see the current trends. Galbraith wrote about people who were beguiled into investing into the market down trend of the early 30's and lost all. Because every bear market has rallies, and thats how they were beguiled, they thought it was going up again. What John calls the "Principle of Maximum ruin". (The term 'Principle of Maximum Ruin' so exactly describes some of Galbraith's writing that I thought that this was a Galbraith term. John was more than mildly indignant at this suggestion and pointed out that he coined the phrase! Apologies, John, excellent term)
I sold out of equities 50% in February 2007 and 50% in October 2007. I wanted to be in cash and not equities in a market that based upon fundamentals was going to go down a lot eventually, and I sold when my charts gave sell signals. At the time I didn't know that October 2007 would be the top of the market, I just knew that the shares were massively over valued. (I lost all my savings plus borrowed money in the 1969 crash of the Johannesburg stock exchange so that was a good life long lesson. It really irritated me that my father, who had lived through the 30's, sold all his shares the year before and bought back at bargain basement prices about 4 years later)
Currently my charts are saying that there will be a bear market rally this Christmas or January. This may be wrong and if so my stop losses will kick in, but if I'm right, and I took some investment positions at the beginning of the month that are doing very nicely, there will be a short lived up, probably a sharp up, and then down. So I watch every day and will sell soon.
My charts will keep me from believing that this bear market rally is a trend reversal and back to the happy days of party making. My charts clearly show no bear market reversal. They keep me a sane trader investor.
And from the fundamentals I am fully confident that the Dow is heading below 5000 in the next 12 months to 3 years, perhaps longer. How much below 5000 I don't yet know, but 1500 is possible. My guess is that we are looking at the next long term bull market beginning around 2018, but again I don't know yet.
But my most important objective is to be sitting on lots of cash to buy back into equities at the market bottom. This, dear people, will be a massive opportunity, and something we cannot afford to miss.