The Four Year Low, Part Two

The Four Year Low, Part Two

Before I continue, a few incidentals…The NYSE no longer reports the advance-decline data based on common stocks only, they now include everything, and I have found the new data to be useless for my purposes…Fortunately in March of 2011, I started to track the advance-decline data based on the volume traded on the NYSE…The resulting inputs pretty much mirrors my old indicator based on the original adv-dec data. There are some subtle differences but for all intents and purposes its message is the same.

When all hell was breaking loose in the last quarter of 2018…I had already raised cash during the summer months of 2018 based solely on this indicator. I ignored all the macro crap that the media spewed out every day as well as anything to do with the economy and anything to do with economists. I ignored the bond market and yield curve and everything else. I focused on this one indicator which is derived from the market itself. Leon Tuey (famed Canadian Technical Analyst) was right…the stock market is essentially a discounting mechanism that will inform the investor at home what will transpire in the coming months…if he/she is willing to listen and pay attention.

And I want to be clear about this…I use this information to manage my risk and position my portfolio where it will have the most utility. I do not use it to time the market…This is a vital point…when you try to predict the future direction of the market, your ego will  automatically get involved in the process and its been my experience to keep my ego out of the investing process as much as possible.

One final point...when I can see that the momentum of breath is at the four year cycle low, I know that the market is deeply oversold resulting in stocks being on sale at cut-right prices (due to panic selling as investors get fearful and mindlessly start dumping everything)...this is a tremendous psychological crutch for me...when everyone else in the market place is panicking and dumping their holdings, I can calmly and coolly pick up good companies at bargain basement levels.

But is there an easier way?.....To just logon to the net and have an indicator ready and waiting for me to use without bothering with spreadsheets and everything that goes along with it…Well I just stumbled across something that looks very promising…but like the old Flash Gordon serials I use to watch as a kid,  you will have to wait for my next post to hear about it...