Mr. Market Will Do What Mr. Market Will Do.


Ahh Darn it … did you miss the bottom again.  Did you miss the chance to really get some nice prices on stocks because you spent time listening to what the “talking heads” on TV were saying and did not spend much time in looking at what Mr. Market was doing?

Don’t feel bad … many did.

The fact is since December 24, 2018 the Dow Jones Industrial Average has increased from 21,792.20 to 25,883.25.  That is an increase of 4,091.05 points or an increase of 18.77%.  All of this while some of you were “waiting for the bottom” and all you did again was let it pass you by.

Look at the four graphs below to see what I mean.

DJI-1
Figure 1:  Vectorvest Chart

Yes, if you spent time listening to the news and the talking heads using up air-time during any day leading up to Christmas and after October 1 … the economy and the market was headed for the toilet and there is nothing Trump or anyone else could do about it.  People were saying “pull your money out” and put it in gold or some other nonsense investment or collectible.

I can assure you had you asked me if the market was going to continue going down or if it was going to start going up … I’d have told you it is going to do what it is going to do … but eventually … it will be higher.  I would have also warned you about making rash emotional decisions.

Look at this chart showing the market just 3 days later …

DJI-2
Figure 2:  Vectorvest Chart

Yes there were still some out there saying the trend up would not continue because “The market has to have a double bottom before it starts to head back up.”

Well, just three more days later and it looks like they may have been right …

DJI-3
Figure 3:  Vectorvest Chart

There was a nice pull back in the market … and if you “missed the recent bottom of 12/24/18 this would have been a nice place to jump in … but there were not assurances because we cannot see what tomorrow brings.”  Like most … you were probably waiting for the “double bottom” that never came.

However had you jumped in then …

DJI-4
Figure 4:  Vectorvest Chart

You would have caught some of that nice increase up.  Now in this one year chart you will see where I have circled the so-called “double bottoms” and showed the increasing value after them.  However, just because the market does re-test a resistance area a couple of times, usually, before it begins to rise in value – does not mean it will always do so.  There was a single bottom on 12/24/2018 before the market started a historic climb of 18+% in just 36 trading days hence.  There have been single bottoms in the past and there will be single bottoms again in the future.  However, if smart, the double bottom rewards those who are patient enough to invest part of their money on the first bottom and another part on the second bottom (if there is one) … and if there is not … at least some of your money would have been invested at the first, and only, bottom.

But again, we will never have a crystal ball to know what Mr. Market is going to do before he does it.  So when you think you see the market at the bottom … always wait for “follow through” before making an investment.  Look at this graph for a good time to get in.  I have changed it to a 3-month graph to make the bars bigger.  This is what is meant by follow through:

DJI-5
Figure 5:  Vectorvest Chart

In Summary:  Remember Mr. Market

Mr. Market
Figure 6:  From the Internet

is going to do what Mr. Market it going to do.  You or me have no influence over it whatsoever.

Fear and Greed
Figure 7: From the Internet

It is how we handle Mr. Markets tantrums that really counts.  If we get too fearful we can lose money and if we get too greedy we can lose money … yet it is these two emotions that have the greatest influence on the market.

This is generally the Cycle of Market Emotions.  Once you understand these … you will be able to make money in the stock markets.

Markete Cycle of Emotions
Figure 8:  From the Internet – SeekingAlpha.com

That’s all for now … thanks for reading.  Study hard and make some waves in the market.

Jerry Nix, Freewavemaker, LLC

Disclaimer:

This information is not recommendations for you to purchase or sell any investments outlined in this article.  The information is being shared for educational purposes only.  I recommend that you seek the advice of a licensed and competent financial advisor before taking actions on your portfolio if you see a need to after reading this article.

 

 

 

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