I know many people like reading self-help books to learn a bit about themselves and grow as a person, but if you ever want to really learn about yourself, trading markets is a great teacher.
You will learn about every inch of your weaknesses and biases. Any blind spot you have will show up clearly in your P+L as you make mistake after mistake responding to your emotions as they jump around with the markets.
It’s been tough, even a little frustrating at times, to navigate the last couple of years. I’ve been focused on capital preservation as my main goal, and that has involved a lot of sitting on my hands.
But like anyone who loves the markets, I want to be actively pursuing opportunities rather than twiddling my thumbs waiting for the markets to move.
And when you sit back and have a think about things, there’s nothing ‘frustrating’ about what’s going on.
The markets have no emotion. They just are.
Will the markets stay stuck at this level for the next 20 years?
Of course not. They will start trending again.
To move beyond your emotions, you have to step back from the daily gyrations.
When you look at markets from a bird’s-eye view across many decades, it becomes clear that markets trend higher over time.
That’s why financial advisers tell you to slowly add money into the markets at regular intervals over time, and eventually you will see a positive return.
But that can take many years to play out.
I’d rather look for the periods when I have higher odds that I will see better returns in future.
That’s what I want to show you today in the Closing Bell video above.
I give you a detailed look at the last 50 years trading in the ASX 200, so you have a much better understanding of where we are now and where we might be heading in future.
The short-term outlook may be bearish, and I show you why I think there could be some more downside ahead in the S&P 500, but in the context of history, we’re getting close to a window of opportunity that has only opened up seven times in the last 50 years.
On five occasions, it proved to be very profitable buying in those windows rather than selling. On the other two occasions, the markets remained stuck in a range for another year or two before trending higher.
If you’d like to get a deeper understanding of what I mean by the window of opportunity, please check out my presentation here that will be live until next Tuesday afternoon.
I give you an outline of what I mean in the Closing Bell video above, and also analyse the US 10-year bonds that are seeing some selling pressure as a result of the spike in supply that’s coming. I also show you that the S&P 500 is about to confirm a weekly sell pivot in the sell zone of the correction from the past year.
We should expect to see some weakness in stocks in the short term, but long-term investors have to stay on their toes and get ready for the coming opportunities due to Window 24.
Until next week,
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Murray Dawes,
Editor, Money Weekend
