Do you want to make money or lose money in the stock market ??
Before you start investing (NOT trading) in the stock market, you need to determine (or at least understand) how you want to invest in the market. The "high level" choices are mainly:
1) What % of your total assets are you going to invest in the market ?
2) What type of gains are you shooting for (excessive, high, moderate, low, etc) ?
3) What type of losses can you tolerate (losses are one-to-one tied to your aggressiveness in #2) ?
In the above, #1 should be easy to determine; #2 is directly tied to #3 (the more money you risk, the more you can make or lose); and #3 is where most "would-be investors" lose their shirts. Somehow, most "investors" think that they can shoot for high gains, without larger potential losses... Not true !!! The trick is to learn, and plan, how you are going to "play the game" (and some people do almost make their investing a game).
All things considered, you will do much better if you learn how to "read the market". You should learn how to do this yourself, or have quantitative analysis algorithms to help you thru the process. The worst place to get your inputs on the markets is from "the press". They simply print what they think will get them the most traffic, right or wrong.
To that end, let's look at the recent market try to ascertain if you see it the way that I do.
Short-Term Market (see attached)
In the graph below, the market (SP 500) in August has been what looks like a disaster, and is now in a very volatile sideways trading pattern between $2945/share to $2824/share (a 4.1% drop in one month). One month is sometimes important but not so much now for intermediate-term investors (like us). This is mainly because the market can go anywhere from here fast (no indication so far when/where that might be).
See attached file... May'19-Aug'19
Intermediate-Term Market (see attached)
Just like almost everything in life, stepping back for a more complete view helps us to better understand what we are looking at. In this case, see the Intermediate term view below. As you can see, the damage in August is not nearly as devastating as the press and the pros want us little guys to think we have. They want us to sell so that they can "buy on the dip".
See attached file... 2016-2019 ytd
Long-Term Market (see attached)
To see what is really going on for the long term, let's now step back even a little further (kind of like looking at a forest fire from a helicopter or airplane instead of from where we are standing). For longer-term investors (and MIPS members), it can been seen from this view that they have been in a strong up market since March'09 and should have accumulated massive gains. From that standpoint, this month's losses are basically minimal.
See attached file... 1192-2019 ytd
That said, this is still a very dangerous market. The most danger now would be in trying to trade the short-term ups-and-downs in the market (as in swing trading). This is the kind of market where "traders" get whipsawed. Remember, to prevent this MIPS rarely trades in the sideways market and either stays with the current signal (Long of Short) or goes to Cash until the coast is clear.
And remember, the press only publishes true or false news that will bring them the most traffic. Usually that results in a somewhat large short-term move in the market that recovers in the following few days/weeks.
Actual MIPS Performance (2016-2019 ytd)
Model No Leverage 1.5x Long / 0.5x Short
Stay tuned and let MIPS tell us what to do next ...
Paul Distefano, PhD
CEO / Founder
MIPS Timing Systems, LLC