Thursday, January 26, 2017

Bagholders Lack Understanding of Time and Concentration

The majority, still not heavily exposed to US stocks, will be big buyers of them only after the rally pushes significantly higher. They'll enter a hot trend driven false assumptions such as Trump's policies rather than safe have capital flows from Europe to the United States are driving it. This is the main reason why the minority must understand what the majority is doing. The majority is stupid but powerful enough to drain investment accounts.

The majority will be bagholders of the next trend transition because late entry and, more importantly, incredibly bad timing (not knowing when to sell). Knowing when to sell is a function of time and concentration (see Dividend Yield Cycles). Long-term investors that lack this understanding will lose because phase transitions - rallies to extreme concentrations are generally followed by crashes and long periods of underperformance.

A long-term chart that forecasts duration based on historical averages of previous up and down impulses, a simplistic view of time, should be ignored as useless information.

Chart: Entertainment Only (Do Not Use for timing)

Headline: This chart says the bull market has years left to go

The Dow Jones Industrial Average finally punched through the psychologically important 20,000 mark on Wednesday, launching a thousand tweets, including one from President Donald Trump.



Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.