Lo and Behold

Back on October 8th of last year I shared the following chart in the post, Here’s What’s Going to Happen.

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Specifically, I stated:

The reason this scenario works and will again is because of good old fashioned herd mentality. Markets correct. The experienced players advise to stay out and expect a rebound with a retest of lows before jumping back in. The low gets retested and everyone rejoices by betting on red and black, then the rug gets pulled out one more time. The strength of the current bounce is prognosticating another dip before the markets put the climbing gear back on.

And as of yesterday, 1-7-2016, here’s what the action in the S&P 500 looked like.

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The herd will steer you wrong virtually 100% of the time. It has literally never been more critical to think independently and see the facts and circumstances as they are within the markets. It is difficult to filter out noise but your retirement portfolios demand that you try. How many fund closures have you read about since December? Even the smartest people in finance are having a very hard time at this game and forecasting is incredibly difficult.

I think this selloff is close to running out of steam and I feel quite confident that the S&P 500 will easily set new highs going into the first half of 2016. I still contend that the Fall of 2015 was the beginning of the larger stock market topping process that will fully avail itself to the investing public in 2016, but not while everyone is staring straight at it. And certainly not while every major bank in existence is publicly sharing all their fears. We need some snapback based on the debt monetization and interest rate levels in other developed markets. When everyone is comfortable again and everyone suspects that 2016 could finish 8% to 12% higher than 2015, then the negative-event-based-fears should muster to create an environment rife with opportunity.

Not that the 4th quarter didn’t present plenty of opportunities. For traders, that whipping volatility was either whipsawing you out of your positions or filling the coffers based on what have recently been traditional patterns of market behaviors. Unfortunately, long-term only investors may have been suckered into new positions having been brainwashed to “fly into the light” and simply buy the dip. For the value types, it was certainly a good quarter to simply sit back and allow the war chest to continue to build.

Lest you think I actually believe that my forecasting skills are somehow less daft than the next bloke’s, allow me to share with you some of my on-the-record prognostications over the past couple of years. I have double the amount of flubs compared to correct calls. It was nice to get the sucker’s rally call right for the current market, but unfortunately, I have been wrong more often than not when attempting to make a bold call.

Flubs:
1. EPC outperforming ENR (Spinoffs)
2. S&P 500 correction from March 26; bottom-ticked the market (Short-term Equity Risks)
3. IBB correcting; went up 3% after call then erased the 3% then went up 9% erasing that gain with a 9% drawdown (Short-term Equity Risks)
4. Canada can beat a S. American squad for the Pan-Am gold (Canada)
5. Europe caving on debt on resolution with Greece; Greece folded and I was so wrong (American Assets)
6. Another leg up in the S&P 500; totally wrong as market chopped exactly sideways until the Sept. corrections (American Assets)
7. QCOM addition to long-term portfolios; price is approximately 25% lower than where I said it was good area to start nibbling; of course it’s a matter of perspective based on time frame (Snapdragon)
8. Bounce and resumption of correction in the S&P 500 (The Correction and a Trade)
9. Going on the record with NCAA football and NFL betting picks; one word…disaster (Handicapping)
10. Shorting Toyota based on gap fills; technically I was right but the action took months when I expected weeks (Revisiting an Old Friend)
11. Bulltrap before a correction in the S&P 500 (Triple-top)
12. S&P 500 could correct all the way to 1650ish (Tea Leaves)

Corrects:
1. TLT and XLU chopping for 3 weeks from March 26 (Short-term Equity Risks)
2. Greece not going back to the Drachma or exiting the Euro in 2015 (American Assets)
3. QCOM filling the gap on a snapback trade up to $71 a share (Snapdragon)
4. JJG ripped higher by 16% after making call to enter trade on October 18th (The Correction and a Trade)
5. DAL falling down to $30 a share for a short trade; thank you kindly ebola (Two Trades)
6. Shorting coffee with JO down to $35 (Whipsaw)

Sorta Right:
1. S&P 500 would correct more than 7% on a closing basis in October 2014; partially right in that it went down another half a percent and then ripped 11% higher; basically wrong but not technically because I’m lame (Some Musings)

As for a final forecast before wrapping up this post, remember to always filter out the noise which so clearly applies to Marginrich.com, too. Want to know who gets paid for forecasting? People who earn salaries for that specific role at a financial institution. Want to know who makes real money off of forecasting? Traders and investors with billions in AUM.

I will reiterate that I think this selloff peters out relatively soon and then begins a higher lows walk upwards. There will be a lot of backing and filling as so much fear exists but I feel very strongly that the all-time intraday high in the S&P 500 of 2,134 will be taken out before Q1 is over.

Bet accordingly.

Update:  April 21, 2016
Well doggone it!  I was wrong about new highs during Q1.  The intraday high for Q1 was 2,072 on March 30th.  About 63 points off of my call, and as of this writing, we still haven’t touched new highs.  I’m a little off on my timing.  That’s ok.  I can live with accurately and publicly calling the intensity of the recent snapback rally while also harvesting the trading profits that went with the call.

2 comments

  1. Patrick Fichtner · January 8, 2016

    Great articles – thanks jay man! John was shorting market for awhile so semi happy although INTC and Sonus are getting slammed too

    >

    • Margin Rich · January 8, 2016

      Hey, my pleasure. Glad to hear the shorts have worked for John. Directional profits gotta get booked though. Keep coming by and reading. And building your war chest.

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