The storm clouds rolled in during the month of December. That was our early warning sign that 2022 would likely be a very rough year. If you haven't been reading my articles over the past few months, I'd highly recommend that you at least go back and read these three (it'll be worth your time):
- "It Could Be a Very Rough Start to 2022" written December 31, 2021 in ChartWatchers
- "The Great Divide Presents Big Problems....and a Wild Prediction for Apple (AAPL)" written January 4, 2022 in Trading Places with Tom Bowley
- "4 Bold Predictions About This Bear Market" written January 23, 2022 in Trading Places with Tom Bowley
I often discuss using technical analysis to manage risk and hopefully these three articles with help to underscore why. On January 8, 2022, at our MarketVision 2022 event, I said that I believed we were going to have a cyclical bear market in early 2022, which is simply an extended period of weakness within an otherwise strong secular bull market. But cyclical bear markets scare investors just as much as secular bear markets, which usually terrorize investors for years rather than a few months. And the media couldn't care less about deciphering the difference. They just want to scare you with headlines and get you to click on their article. That's their only goal. You think they're trying to educate us? Really?
You can use technical analysis to manage your money as well as the best professionals and we have countless testimonials to prove it. Here are four of my recent favorites:
- "I have been an on/off subscriber and following you for maybe 3 years. I have to admit I am extremely impressed by your analysis and strategies. I wrongly assumed you were a perma bull and long only momentum trader. To see you quickly switch gears and so accurately forecast and predict this year's bearish market is extremely impressive. I will be renewing my subscription."
- "I just wanted to say Thanks to Tom. Because of his guidance, my money has been on the sidelines, out of the market, since the first week of January. Tom warned us on Dec 28th that the rotation to defensive sectors was taking over, and to tighten stops. He has been accurately sounding warnings of the market going lower since then. When the PPO of QQQ crossed over with an upward bullish signal (one of my favorites), instead of going long, I stayed out of the market because Tom was correctly warning us that the selling was probably not yet over. Thanks, Tom. My trading account has avoided major losses because of your guidance."
- "Your service & guidance is awesome. Couldn't be happier with all of the layers of education provided. It's very thorough."
- "I am more passionate about Tom's work than just making money."
We receive lots of feedback from our members and we encourage it. These four, however, I wanted to point out because they're all missing one thing. Not one of them said, "thanks for the ABC trade where I made $xxx". I believe EarningsBeats.com stands above all others because of our market guidance and our ability and willingness to share our knowledge, which has been learned over several decades and many different market environments. I learned from the best, John Murphy, who continues to post excellent articles here at StockCharts.com. I frequently give John a lot of credit as he is not only a great teacher, but his work has been truly inspirational.
If a testimonial focuses only on the dollars made on a trade, then it stands to reason that the value of our service is dependent on our last trade, or our last few trades. Members who are only looking for a quick score are not really the types of members that I want to attract. I want members who have a thirst for knowledge and are looking to improve their investing/trading process. I've been told many times that my strength is teaching and I absolutely embrace that. Investing/trading is HARD. You must have confidence in your process and in your knowledge. Otherwise, market makers and the media will feast upon your emotional state, whether it be greed or fear.
One of the testimonials above said they wrongly assumed I was a perma bull. Before I comment further on this, I want you to look at the following Big Picture chart of the S&P 500. It spans 100 years and I've annotated the secular bull markets (blue directional lines) and secular bear markets (red-shaded areas):
The three secular bull markets on this chart span the following years:
- 1950 through 1969
- 1981 through 2000
- 2013 through 2022 (still in play)
The total number of years of these secular bull markets cover roughly 50 years of the past 90 years. We've had the following cyclical bear markets within these secular bull markets as follows (months that they lasted in parenthesis):
- 1957 (3 months)
- 1961-1962 (7 months)
- 1966 (8 months)
- 1968-1969 (8 months)
- 1980-1982 (21 months)
- 1987 (2 months)
- 1990 (3 months)
- 1998 (3 months)
- 2018 (3 months)
- 2020 (1 month)
So within the 50 secular bull market years, here's the breakdown between bullish months and bearish months (cyclical bear market months):
- Bullish months: 541 months
- Cyclical bear market months: 59 months
I believe we're in a secular bull market. Getting back to the perma bull comment now. Do you think I'm going to do better investing during a secular bull market with a bullish mindset or bearish mindset given the total months of each above? 90% of months in a secular bull market are bullish - or at least not a part of cyclical bear markets. You want to call me a perma bull? Go ahead and I'll wear it like a badge of honor.
Also, consider this. I began writing in my Trading Places blog in March 2015. We've been in a secular bull market the entire time that I've been writing this blog. I've remained nearly 100% bullish during one of the strongest secular bull markets in our history. Hey, if you want to criticize me for correctly calling this bull market for the past 7 years, feel free.
I try to remain completely objective, but I'm not going to turn bearish during a secular bull market very often. Why? Well, look at the numbers I just provided above. I don't know how perma bears make money in the stock market. When I'm bearish, I discuss my rationale - just as I've done for the past 2-3 months. But this cyclical bear market won't last much longer. And then I can revert back to being my normal perma bull self. :-)
The current cyclical bear market is in its 3rd month. If you look at the history of cyclical bear markets above, you must realize that the 2022 version could be closer to its end than its beginning. Just when the media talks about runaway inflation, a hawkish Fed, the Russia-Ukraine war, the upcoming recession (which is next, by the way), and whatever else they want to talk about, I'm going to be buying at or near the bottom. If I mis-time it by a month, or even a few months, so be it. And if I can catch the bottom just as I did the recent top, though, well that would be awesome!
We're about to announce our next two events, our March Educational Series. I'll be writing more about them soon, but to make sure you don't miss it, CLICK HERE to sign up for our FREE EB Digest newsletter. It's completely free with no credit card required and you may unsubscribe at any time. We ALWAYS announce our events to our entire EB Digest community, so it's a great way to receive a free newsletter 3x per week AND also be alerted to educational events.
Have a great weekend and Happy Trading!
Tom
