For months I have been saying that the stock market was in a stumble along the bottom, we would not meaningfully breach the November low and somewhere in there as part of this backdrop would see a massive bear market rally with a run back down to 800 or so afterward.
I still believe in this thesis but now that we are essentially at the low the chance of being wrong is now front and center. In the paragraph above I say not meaningfully breach, candidly I’m not exactly sure what that means but for example a 3-4% breach would not be meaningful to me nor would a one week decline that scared the hell out of everybody followed by a run right back up to 800 the following week.
There certainly seems to be no reason for the market to go up right now but of course that very fact has often been the exact time when the market does turn up, either for a bear market rally or the real thing. Another thing to realize is that when the market does turn up no one will expect it and no one will think it is justified which is exactly what is going on with the China market over the last couple of months and why I went back in in November.
There is nothing wrong with having opinions about short term goings on in the market. Some folks do in fact have a knack and I think anyone who pays any kind of attention to the market could be right about a short term move every so often at a minimum. This sentiment has nothing to do with trading or otherwise making yourself vulnerable to that sort of gut feeling.
The scenario I have been working with will either be right or wrong. You may have some sort of expectation about the stock market for the next year and that will either be right or wrong. A point I have tried to make over and over is to not be too vulnerable to whatever you think is going on in case you turn out to be wrong. I think we have a big bear market rally coming, so I added a couple of things along the way (a couple of months ago). I did not deploy all the cash raised, had I done that I’d be down a whole lot more.
I get a lot of emails in my TSCM account from readers there who just don’t get or don’t believe in avoiding big bets. The concept is not that difficult and the way I view the world this is when small bets pays off the most and when you need that benefit the most.