No pain, no gain

Before today’s main topic, I have a contest to win a free copy of one of my books! More on that below. Anyhow…Some of you might know that I’m a “lifetime athlete”, focusing on bicycle racing for much of my life. Way back in January 2022, I produced a video outlining some comparatives between athletic training (in any sport) and a trading strategy. My main message in that video was that – whether training for competitive sports, or investing for wealth and security in your future, you need to follow a systematic approach.

Below is my photo from the Florida “Intimidator” race in April 2023. I won, and suffered deeply to do so. Type 2 fun, baby!

I bring this comparative up because of an interesting dilemma facing investors right now. The broad US markets are being driven by a small group of very good companies – that just happen to be hyper overbought. Much like buying a Honda motorcar, which is a great product. The car market shot such vehicles up in price after the COVID era supply chain crunch, only to see prices retreat 2 years later. The US tech sector, which is “driving” the indices (pardon the pun), is like a Honda Accord in 2021. Great car. But in 2021, Accords were selling for well over list price on the used car market.  Prices were doomed to eventually decline back to reality.

Same goes for the best tech ETF’s trading in Canada or the USA – or directly investing in NVDA stock or MSFT, amongst others. Great companies. But FOMO (Fear of Missing Out) has driven these stocks to well past their “list” prices. Like the car market, this took a while to wash itself out. But it inevitably did. And that will happen with the tech sector too.

Here’s a chart of the SPX. Every single price and moneyflow momentum indicator is mega overbought. This is like buying the $40,000 Honda Accord for $60,000 during COVID.

The dilemma  is not IF this market will correct. It will. It must in order to remain healthy. The real dilemma is trying to figure out WHEN that will happen. Whenever that is (and I anticipate soon), I’d anticipate a minimum of 5%, but likely closer to a 10% pullback. My target remains 4800-4600 for the SPX.

Back to the athletic training analogy:  I train myself to suffer through almost anything when I am focused on a specific race. As you train, your body starts producing a hormone that acts a little bit like Tylenol. It helps buffer the pain. You start to get used to that pain. In fact, you embrace it as the price to pay for success.

The pain of not being in this overbought market is being felt by anyone not holding an index ETF, or shares of tech stocks at this time. FOMO hurts! But, sometimes we need to deal with that pain in order to win in the end. That’s because the pain of being IN these overbought stocks when they correct can be severe. Like in athletic training, I recommend you stick to a logical systematic trading process. See my Online Trading Course for a step-by-step process on how to do this. Over time, you will develop the conviction to bear through the pain of FOMO.

Bear-o-meter contest

I will be reporting the results for this months Bear-o-meter reading on Monday. The meter, as many of you know, is a compilation of 11 factors that look at Trend, Breadth, Breadth-momentum, Sentiment, Seasonality, and Value for the US markets. It ranks from 0-8, where 0 is more an unfavorable risk/return tradeoff, and 8 is a highly favorable risk/reward tradeoff. Last month the reading was 3 out of 8.

I am inviting all readers to submit in the comments section below your best guess for where the meter will land. BTW, you can “hack” the contest by reading my book Smart Money/ Dumb Money and calculating the results yourself. Or, guess.

All readers who guess the reading correctly (which will be calculated with data as of the close of today, Friday March 1st) will have their choice of ONE OF MY 4 BOOKS sent to them. Your choice. If your guess is correct, I will have my assistant contact you via the email that you have under your comment (which only we can see) to get a mailing address and your choice of book.

Here are the links to the books on Amazon:

SMART MONEY, Dumb Money: Beating the Crowd Through Contrarian Investing eBook : Richards, Keith, G.: Amazon.ca: Kindle Store

Sideways: Using the Power of Technical Analysis to Profit in Uncertain Times: 9781926645681: Books – Amazon.ca

Sideways: Using the Power of Technical Analysis to Profit in Uncertain Times: Richards, Keith G, Crack, Daniel: 9781988360881: Books – Amazon.ca

Smartbounce: 3 Action Steps to Portfolio Recovery: Richards, Keith G: 9781926645131: Books – Amazon.ca

 

NOTE THAT YOU MUST PLACE YOUR ANSWER IN THE COMMENT SECTION NO LATER THAN MIDNIGHT ON SUNDAY MARCH 3RD. ANSWERS PLACED IN THE COMMENTS AFTER THAT DATE & TIME ARE NOT ELIGABLE FOR THE CONTEST.

What they don’t teach you in drama school

After announcing layoffs for 10 per cent of staff and bonuses for its senior management, CBC will get a $1.4-billion handout in 2024-25, an increase from the $1.3 billion it spent in the previous fiscal year.

Putting the “buying media bias” discussion aside, the current government really needs to get a few people with Economics degrees and business backgrounds on their staff. Any businessperson knows – you don’t throw good money after bad.

Speaking of businesspeople…From David Rosenberg:

“Because of the ongoing immigration boom (a vote-getter for the Trudeau government), the population expanded at a +3.1% annual rate in Q4, and that followed a +3.3% pace in Q3. What that means is that real per capita GDP contracted at a -2.0% annualized rate in Q4 after having tumbled -3.7% in Q3. For all of 2023, the Canadian economy contracted -1.2% on this basis. The level of real GDP per capita, I am sad to say, is no higher today than it was at the end of 2014.

What Canadian businesses are doing instead of investing locally is taking their capital and deploying it in other geographies where that capital is welcomed. In Canada, we have a government that loves to attract people, but physical capital that generates future productivity growth — not so much.” Rosenberg

My thoughts…hmmmm…what happened after 2014..aka 2015? Anyone…? Anyone…?

Come on, I know you know this one! You can answer this question in the comment section below.

If you are correct, you don’t get a book. Because its too easy. You know what happened in 2015 that set Canada up for failure! But if you answer correctly, and you also guess the Bear-o-meter level, I might just throw in a second book for kicks n’ giggles. If you don’t know what happened in 2015 that has ruined Canada, please seek help immediately.

 

52 Comments

  • Hi, Just a guess 3 again
    Thanks.
    SMART MONEY, Dumb Money: Beating the Crowd Through Contrarian Investing eBook : Richards, Keith, G.: Amazon.ca: Kindle Store

    Reply
  • Bear-o-meter guess is 2! Too much dumb money in the market while smart money is transitioning out.

    Reply
  • I was too quick to answer the bear-o-meter contest that I didn’t finish reading the article about the 2nd question.
    My bear-o-meter guess is still 2! Too much dumb money in the market pulling the bear-o-meter down. Plus we all know that Mr. Justin Trudeau ruined the country, especially our economy starting in 2015 when first elected. I know I definitely got one of these right.
    PS already own two of your books (Smart Money Dumb Money & and latest edition of Sideways). Both fantastic.

    Reply
  • I would say the reading is going to be 4 and the Trudeau government was voted in 2015.Thank you

    Reply
  • trudeau, the bastard, got elected in 2015!
    Bear-0-meter will be 1

    Reply
  • Bear-O-Meter contest: my guess is 2
    A recession happened after 2014

    Reply
  • In 2015 the people of Canada made a historical mistake electing Trudeau after ignoring the damage his father done to our country.
    Like father like son !!

    Bear-o-meter hovering around 5.

    Looking forward to reading your book.

    Reply
  • Hello,

    1) Bear-O-Meter guess -> ‘2’
    2) What happened in 2015 -> a drama teacher liberal named Justin Trudeau defeated then Prime Minister Stephen Harper, to become the new Prime Minister.

    I whole-heartedly agree we need some people with economic backgrounds (preferably in Austrian economics) to lead Canada.

    Reply
  • Bearometer reading of 2

    Trudeau…. but what’s even worse is that he was re-elected.

    Having said that, even Trump and Poilievre are just playing their globally appointed role. – Or something like that. 🙂

    I just happend to talk to a mostly retired RCMP officer the other day who was on the force for 24 years, and asked him if he noticed any difference between liberal and conservative governments. He said it changed nothing.

    Reply
  • Bearometer reading of 2

    Already read & took extensive notes on your first 2 books, would be interested in doing the same with Smart money, Dumb money!

    Reply
  • barometer will be 4.
    even though you keep anticipating a retraction, the meter is a longer term measure. I think breadth is expanding. Russel 2000 is making new highs so momentum is still there.

    Reply
    • Yes–it is a risk / reward measurement, not a buy/sell timing model

      Reply
  • Teflon Trudeau was elected however his shield is getting very thin.
    Bear-o-meter should be 2.
    Your choice, any 2 books.

    Reply
  • Bear-O-Meter guess is Level 2 and 2015 Trudeau was elected, but don’t blame us in Alberta!

    Reply
    • I’m a Danielle Smith Fanboy, BTW–way to go Alberta for electing her!

      Reply
  • Bear o meter is now at 1
    Justin T was elected and destroyed the country

    Reply
  • Bear-O-Meter level 2
    JT 2015
    I already have Smart Money, Dumb Money

    Reply
  • Bear O meter reading is 2. As far as what happened in 2014/15 while it was Trudeau who is destroying our country. Thank you Keith for telling it like it is. I love your blog and honesty. Look forward to your book!

    Reply
  • My guess would be a Bearometer of 2.
    Calculated from a half baked bearometer I’ve made from an older book I bought from you and morsels you’ve provided along the way. You’ve said lately Keith, we may be in for a healthy pullback, so I think a drop of one to a level of 2, might be appropriate.
    As for 2015, Canada went woke, and we know how that turns out….

    Reply
  • My guess is Bear-o-meter of 3.

    Just a suggestion that for the Bear-o-meter you add a Line/Arrow like a clock. Also it appears to me that when the reading was 0 back in early November, it was a great buy signal?

    Reply
    • Yes, the signal was for high risk but the market decided “damn the torpedo’s full speed ahead”

      Reply
  • My guess is 0 for the 🐻 bear -0- meter!
    All the best for everyone and thanks Keith for your time to this blog!

    Reply
  • This is like shooting fish in a barrel.

    By the way, Keith, I just purchased your revised book Sideways from Amazon.

    Bear-o- meter comes in at 2.

    Unfortunately, Justin Trudeau elected in 2015.

    Reply
  • G1: BoM at 2
    G2: JT in 2015
    P: Smartbounce 🤞
    H: Read SM/DM & completed your OTC
    C: Your perspective is brilliant

    Thanks so much & happy cycling

    Reply
  • Bearometer at 4. justin trudeau hired as prime minister. but not so prime.

    Reply
    • Sorry Kris, you missed the deadline for the book. It was Sunday midnight. But, you got it right…in both cases!

      Reply

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