Today, I want to illustrate a perfect example of WHY you need to use a systematic investment process and ignore the crowd. At my MoneyShow presentation on Sept. 17th at 4:30pm, I will be covering contrarian investment tools and – more importantly – the mindset necessary to stick to a systematic process in the face of conflicting headlines. Headlines that urge you to invest with the crowd, despite what your indicators are showing. I hope you can come out – Here is the link to register.
Many of you have taken my Online Technical Analysis Course (I urge you to do so if you have not). By taking the course, you will have developed a systematic process that will help you: Identify the trend, Identify Buy and Sell points, Use quantitative tools to identify the current risk/reward tradeoffs on the market, and more. Most investors, including the Investment Advisor and Investment Managers out there, are crowd followers. That’s not so bad when we are entrenched in a raging bull market. But bull markets end. Markets then transform into a bear phase followed by a consolidation phase. My course outlines a systematic process on how to identify these transitions, and ignore the headlines.
A perfect example of why you need to ignore the headlines
Modern news services utilize news agencies, who in turn supply the “wholesale” stories to publishers. From there, the reporters employed by the publisher enhance and re-write the content for their publications. That’s why the same “news” repeats over and over again in so many publications. You’ve seen this before. This is problematic for readers in many ways. Repeat anything enough and it becomes the truth…even if its not….
But for investors in particular, it becomes particularly important to understand this process. Take the headline below. On August 11 of this year, this story was repeated in uncountable publications. You should Google the headline and see how many integrations of the EXACT same story are online.
The “news” was that – apparently – the bear market was over for the NASDAQ and it was time to jump back in. Below is the daily chart of the NAZ. I’ve noted on the date of the article’s distribution. Perfect timing!:
A different headline
Here is the headline from this blog that I published less than 2 weeks before the mainstream media headline. The difference: I was not following the crowd or reprinting the bias of the market pundits at that time. Just days before I wrote the blog, my the Bear-o-meter read full-out high risk conditions. This, despite the rally.
Bear-o-meter reading to be published next week
With the recent selling on the markets, it will be interesting to see if the risk/reward tradeoff – which has been accurately predicted by the Bear-o-meter as “High Risk” for many months now- will change. Stay tuned to find out – I’ll post my findings early next week.
Over the years you’ve taught me to trust the charts Keith….can’t thank you enough for your time to keep me on the right path. Your lessons, and willingness to share your knowledge, has saved me (and made me) hundreds of thousands of dollars. There isn’t a big enough “Thank you” for that!
Thanks Chris–I assume you took my TA online course as well as read the blog.