Fourth Quarter Blues as Pigs get Slaughtered...
This weekend marks the six month anniversary of the current AK Trading indicator buy signal. Since 1973 there have been 13 rallies lasting six months or more, with the average lasting eight months. The average gain was 30%, versus the 37% return since the current buy signal was issued in late March. 1999/2000 and 2003 were the only times prolonged rallies delivered more than the current 37% return, and the follow on periods then were very difficult for the bulls. Indeed, 12 of the 13 prior prolonged rallies of this magnitude since 1973 led to a rapid retest of the 200 day moving averages post peak, and the 13th time came pretty darn close to doing so. Most of those retests of the 200 day happened in a very rapid crash pattern lasting less than a month post peak.
The average drop post prolonged rally peak was 18%, which is very close to new bear market territory. Thus, the danger going forward here is that once the rally peaks it will be followed by a one to two month crash of approximately 18%+ to retest the 200 day moving average for the stock indexes. That's a near 40% drop for those complacent bulls trading long on margin or by leveraged ETFs.
The goal is to make money when new trend signals are delivered upon, and then exit those gains with grace before the meat of the selling reversal lands, creating a steady upward staircase of advancing portfolio values followed by sideways movement on the performance charts, ready for the next new trading opportunity when hopefully the upward stair-step to new highs for portfolio returns continues.
Right now one should be looking to lock in profits ahead of the expected turn coming our way fast - so that we don't end up with a downward stair-step in our portfolio values - which I have been doing over the last few weeks in my GrQ portfolio.
Those chasing this market believing that a new mega bull is underway and that investment trees can grow to the sky are about to find out the hard way that bulls make money, bears make money, while pigs get slaughtered.
Kevin Wilde, Chief Trading Strategist AlphaKing.com