Articles

By: Chris Rowe — May 7, 2019

I'm calling out IBD on their BS

When I was a kid I made money by packing groceries at the grocery store and collecting cans to recycle.  But, my first job that officially paid me was the New York Post.

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In my early adulthood, my introduction to the stock market was based purely on technical analysis.  I read the Wall Street Journal with interest but what actually gave me the most useful and trade-able daily information was Investors Business Daily (IBD).

My connection to them and what I saw on the newsstand this weekend triggered this article.

What I'm going to say about them today is going to hurt me just a little bit on the inside.

And I feel I can say it BECAUSE I feel that we go back to my childhood years, kind of like how you'd feel more comfortable playfully talking smack to your life-long friend than you would someone you don't know as well.

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I was leaving the grocery store with my two kids who are now the same age I was when I was earning money packing groceries.  I had just tipped the young man who packed mine, so I was reminiscing about all of this when I saw my two buddies - IBD and NY Post.

I snapped these two pics without explanation, and despite my kids giving me their usual "daddy's a weirdo" look.

I see the headline "Why This Bull is Still Running" and immediately I was overwhelmed with resentment for the entire financial media industry...because I already know they're loaded with B.S.  When I saw the two front pages, side by side, I couldn't help but think what a shame it is that the mainstream world gets such a backwards view of why the stock market is doing what it's doing.

The financial media trains you to think you need to know a whole bunch of stuff that you really don't.  They need to write stories.  They need a plot.  Otherwise, they aren't selling subscriptions.

First of all, if you see headlines like this, just know that you're likely at or near a short-term top.  Financial media has a stellar track record for bad timing on their bullish headlines.

But secondly, here's the real reason why the current bull market is still running:

The stock market s*** the bed from October through December to the point that it became historically oversold.  It hadn't been this technically oversold since the 2008 crash and, prior to that, the 1987 crash.

Plain and simple!

After markets get that oversold, like a catapult that has been pulled back extra hard, the stock market just "wants to" go straight up.

The reason is simple.

The stock market has a hard time moving higher when there are huge blocks of stock for sale.

From your next door neighbor living room trader all the way to the 40-year professional trader, all of the "scared money", a.k.a. "weak investors" abandoned ship in December.  That is, if they hadn't already jumped ship in October of 2018.

Therefore, those who would have stood in the way of a strong bull rally by selling shares are, for the most part, not in the market right now.

So the current market decline should be welcomed by bulls as a great buying opportunity, even though the market may appear to be "toppy", at first glance.

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The last time the stock market reached oversold territory on a long-term basis was January of 2016.  The green arrows point to that and the December low.

I've explained some of the major indicators that basically give you the winning numbers to the lottery in this case many times throughout my career and you can find them in the True Market Insider archives.

I won't do a technical analysis lesson here.  But I do want you to stop letting the financial media grab hold of your emotions, causing you to make terrible investing mistakes.

Investing can be incredibly easy.  In fact, my newest trading service has a 21 for 23 trade win-rate where half of the trades were bearish (profiting from price declines).

I'm 100% confident that if you were to never watch financial TV again, never read another financial media article and completely abandon fundamentals, only focusing on technical analysis, that your trading success would be ridiculously improved.

You would look at the talking heads as a bunch of buffoons who obviously don't understand what's happening today, let alone what is going to happen in the future.

If you're focusing on individual stocks, especially small companies, then the fundamental story does matter a bit more.  But if you're talking about the major market averages or big groups of stocks such as sectors, then consider this:

  • More than 80% of the volume traded in the stock market are index funds and index fund traders.  That means buy orders and sell orders that don't target an individual stock, but a large number of stocks that have something in common at the same time.  If you wanted to buy "the S&P 500" then you'd be buying 500 stocks at once.  In other words, the most influential buyers are not looking at the fundamentals of the stock they're buying.  They're buying and selling based on the technicals.
  • Passively managed funds have risen from 25% to 45% over the past decade according to Bank of America Merrill Lynch.  This upwards trajectory continues so the focus on technicals instead of fundamentals increases with time.
  • 50% - 90% of the volume traded in the U.S. market each day (depending on volatility) is happening automatically by algorithmic-based computer programs.

So what?

The computers are programmed to trade large groups of stocks based on TECHNICAL INDICATORS.

That's why people who have a basic understanding of technical analysis seem to always know where the market will likely top out - or bottom out and reverse.  All you have to do is learn a few basic indicators and you'll know more about the future of the market 3 - 6 months out than 99% of investment advisors.

So please at least meet me halfway and watch and read half as much financial media BS. Instead, spend that time learning technical analysis.

I'll be here in Boca Raton waiting for you to come take me out to dinner to show your gratitude.

Chris Rowe

Founder, True Market Insiders

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