Stock Market "Nausea Index" Going Off The stock market (SPY) has seen fresh lows this week scaring many investors into selling their positions. On the other hand, 40 year investment veteran shares a proprietary market indicator...
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The stock market (SPY) has seen fresh lows this week scaring many investors into selling their positions. On the other hand, 40 year investment veteran shares a proprietary market indicator that points to a significant bounce coming soon. Is he right? You be the judge by reading below.
(Please enjoy this updated version of my weekly commentary from the Reitmeister Total Return newsletter).
I bet you thought I forgot about you. Or was paralyzed in the fear of the market volatility leading to no intraday alerts.
Nothing could be further from the truth.
I have been to this rodeo before. I have laid out week after week the fundamental premise behind the bull market story. And tackled each false bearish premise as they have come up.
This led to a game plan that was well articulated over time and solidified on Friday that it would likely be the beginning of the bottoming process (as shared in my recent commentary: Is the Bear Market Hear?).
So there was nothing left to say other than for it to unfold. Kind of like a coach that has already called in the play. There is no need for another time out or further discussion. Simply...let's play!
Indeed there were scary moments on both Monday and Tuesday. But because you had the game plan, then my silence was ascent that holding on waiting for a bounce was still the way to go.
So we held through some scary times this week gladly to find ourselves leaping ahead of Mr. Market. Meaning that the S&P over the last two sessions is actually in the red at -0.94%. That pales in comparison to the +2.04% gain enjoyed by Reitmeister Total Return members.
That's a good quick summary of recent events. Now let's go deeper on some additional thoughts I assembled for today's commentary.
Market Commentary
We previously have talked about the bearish fallacies being put forth on Inflation, Higher Rates, Goldman Sachs earnings. (See 1/19 article: 3 Bearish Myths Busted). These were vetted to show that there is not a sound fundamental reason for the recent market decline. Rather it must be technical problem.
Meaning a testing of investor convictions to the downside where fear takes the helm over greed. And when that test of faith is done, then it creates a firmer foundation for the next bullish run to emerge.
The one fundamental point we didn't discuss so far is the concern of military action. Like what if Russia tries to take control of the Ukraine. That begets the question...
Is military action a cause for market decline?
No. Typically there is an initial shock that produces a modest correction followed by a raging bull run. That's because military action is quite stimulative to the economy because of a massive increase in government spending.
So again, each individual item we discuss is not bearish in its own right. But the growing number of these individual concerns for the market to digest all at once is likely weighing on investor sentiment helping to clean house on excess valuations. The biggest shame is that even stocks that were reasonably, or even attractively priced, come down too. Meaning that no one is spared the lashings at times like these.
Reity, why not sell now and buy back in after a bounce?
That logic always sounds so good on the surface. But works very poorly in reality because of the speed of the market it is nearly impossible to say when the bounce is for real. And when you finally feel comfortable enough it is often at a higher price than where you sold.
And by speed of the market, just look at the last 2 days. How massive 2-4% losses for the overall market became gains intraday. And in the case of today, that gain frittered away to another loss by the closing bell.
Also remember that I am not just giving recommendations for myself where I can go from thought to action in 10 seconds at my online brokerage firm. Instead it is a longer process when running a newsletter like Reitmeister Total Return that goes a bit more like this.
Initial thought on the market > Determine if window is 24-48 hours giving customers enough time to act > if yes, then write up trade > if not, then take a pass.
I know that the above flow may seem unsatisfying to some that are willing and able to act on a moments notice. However, the majority are not. Investing is a hobby rather than a burning passion. And there are many other things on the list of life that come before acting on a trade.
But even if I did tune up the service to be more timely, then you have the part that is truly most important "timing the market is a fools errand".
Meaning that timing market moves is much easier said than done with accuracy often no better than a 50/50 coin flip. Which is why I rely more on the fundamentals as my guide of where the market "should be headed". And that is higher at this time given the economic evidence in hand.
WHEN THAT HAPPENS is always a mystery. Anyone pretending otherwise is a charlatan. The closest thing I have to a market timing indicator is what I playfully call the "Reitmeister Nausea Index".
That being where the market drops so precipitously beyond any rational point that I start to get queasy and think that maybe I am wrong. This causes me to think about throwing in the towel to sell out. However, I have found if I just wait 1-2 more days past that point of pain, that the market very often will hit a point of capitulation that begets a serious and lasting bounce.
And yes, right now that Reitmeister Nausea Index is hitting highs not seen in quite a while. And thus, why I am staying the course with my fundamental view that stock prices should go higher I the weeks and months ahead.
Will it be easy?
HECK NO!
Easy is not on the menu at this time. Likely the bounce will come when you least expect it. And just when you start feeling comfortable the bull run is for real, then we will violently sell off again. As the smoke clears we should find ourselves moving closer and closer to the previous highs...then on to new highs.
That is why we are staying fully invested at this time. And even hold on to some of our biggest losers because they are typically the ones that bounce the most when the tide turns.
What To Do Next?
Discover my top picks for this hectic market environment.
I am referring to the 12 stocks and 2 ETFs in my Reitmeister Total Return portfolio that firmly beat the market last year.
In fact, the 2 ETF trades are plays on the rising interest rate environment and dramatically outperforming the market of late. (Because the Fed is firmly on a rising rate path).
All of these selections are based upon my 40 years of investing experience. Plus we rely heavily on the benefits of the POWR Ratings model with it's impressive +30.72% annual returns since 1999.
All you have to do to see my current recommendations is to…
Wishing you a world of investment success!
Steve Reitmeister…but everyone calls me Reity (pronounced "Righty")
CEO, Stock News Network and Editor, Reitmeister Total Return
SPY shares were trading at $439.04 per share on Wednesday morning, up $4.57 (+1.05%). Year-to-date, SPY has declined -7.56%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as "Reity". Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity's background, along with links to his most recent articles and stock picks.
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