EC From Silver Linings To Gray Skies

“I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, “Well, you know this is a bull market!” he really meant to tell them that the big money was not in the individual fluctuations but in the main movements – that is, not in reading the tape but in sizing up the entire market and its trend.

And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! “

 – Reminiscences of a Stock Operator


Since I penned the “Silver Linings Playbook” for markets on February 11, 2016, the “main movements” have been up. Thinking has been a liability. Brexit, the U.S. elections, Syria, North Korea, and Comey – all reasons to think – and all distractions from the primary trend. Sitting has earned the “big money,” as it always does during long uptrends.

And a long uptrend it has become, with the S&P 500 trading above its 200-day moving average for 242 straight trading days, one of the longest runs in history.

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The Nasdaq 100 Index ETF (QQQ) is currently tied for the longest streak above its 50-day moving average in history, at 130 consecutive trading days.

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Above the surface, all seems to be well in the world, as I outlined recently in “Is This as Good as It Gets?” It has rarely been easier to sit still and enjoy your gains than it has been in the first half of 2017. Every minor drawdown has been met with strong buying, soon followed by new all-time highs. Equity returns with bond-like volatility – what’s not to like?

But all good things come to an end. There comes a time when thinking is necessary and dare I say prudent. Is now such a time?

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Disclaimer: At Pension Partners, we use Bonds as our defensive position in our absolute return strategies for all of the above reasons. Bonds have provided a more consistent defensive alternative to ...

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