Fear Is The Enemy Of Investors: Weekly Nifty 9

Research Report Excerpt #1

A huge challenge to achieving long-term gains in the market, if not the #1 reason, is the ability to overcome “fears”. The fear emotion is the greatest variable an investor/trader will likely ever contend with in the market. It’s a seemingly endless battle. Over the last 15 years as an active trader and investor, I’ve learned that the best way to overcome fears are with the following:

  • Time/duration: As we’ve outlined many a time in the past, TIME is the investors' greatest asset.
  • Never invest capital that is NOT INVESTMENT CAPITAL.
  • Maintain an open-minded, flexible approach to the trend, knowing that all trends break down but resume the path of least resistance.
  • Build your resources, create a team of resources.
  • Stay invested, no matter what, stay invested… because…

Research Report Excerpt #2

With respect to the more immediate potential market trend, the path of least resistance remains higher. For the upcoming week, however, we have some conflicting seasonal data. Recall the Memorial Day weekly S&P 500 performance data that was outlined in this past week’s State of the Market video below:

may 25 iotw chart 1

  • Memorial Day officially became the last Monday of May in 1971. Since then, it has been a bullish week for stocks with the S&P 500 (SPX) averaging a gain of 0.52%, which beats the typical weekly return since then of 0.17%. Recently, however, the upcoming week has been dreadfully bearish. Since 2010, the index has lost an average of 0.60% during the week of Memorial Day. Only five of the 11 returns have been positive. Last year we saw a solid Memorial Day week as the S&P 500 gained just over 3%. While the market has done outstanding since 2010, this coming week of Memorial Day has been an exception.

Research Report Excerpt #3

For a clearer view of the S&P 500 A/D line achievement this past week, I’ve extrapolated the chart as shown below. The truism of markets that we have come to know is that breadth leads to price. Ultimately, the A/D line highs suggest that new highs at the index level are still to come. It may take days, weeks, or even months, but this is a net positive development even as the S&P 500 did not achieve a new all-time high this past week. The benchmark index finished the week less than 1% from its all-time high.

Possibly a more convincing new all-time A/D line came by way of the NYSE this past week. The following 2 charts show the strength in NYSE breadth, coupled with the Value Line Geometric Index (XVG), which is also at its record level. These 2 charts, when coupled with the S&P 500 A/D line record high, help to dismiss with the permabear rants that largely focus on narrow data sets and correlations that can’t scale or cause market declines of great consequence. A/D lines are, by definition, SCALE! If it’s problems with the market you seek, go to the A/D lines for any confirmation.

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