By: Chris Rowe — September 4, 2020
Friday Q&A - 80% Pullback Coming?
Each Friday, the editors rotate and answer a question asked by our readers.
Looks like it’s my week!
Hey Chris, just for the fun of it, I’m calling this the top.
I’ve learned everything from you, which has given me confidence to trade using technical analysis.
There are a lot of clues other than charting, and when you put them all together it points to much more than just a 5% or 10%, or even 50% pullback. More like falls 80% more. Mean line in January maybe?
As far as I’m concerned, no matter if I’m right or wrong, TAM was worth every penny! I did 1 year then took you up on the lifetime offer. Best money spent!
Probably wrong, but it’s fun guessing (between you and me and anyone else that might read it… I’m pretty confident I’m not wrong).
This will be the best darn testimonial ever if it really does play out. GO TAM!
Hahaha, thanks Shawn!
You know, one thing I don’t mention much in TAM, but that I later started pounding into people’s brains, is the SUPER important consideration of how recently the market has been “washed out” (aka “oversold").
And also how deeply.
We're fresh off a deeply oversold, washed out market (March lows). So all of the scared money -- aka fast money -- has been largely shaken out.
Anything’s possible, but probability is on the side of the advance.
Also, global financial market RS is moving more toward U.S. stocks. Even the second-place ranked fixed-income strength is structured in order of strongest to weakest, which also matches the highest risk to lowest risk.
Right now, the fixed-income asset class says this is a “risk-on” market. Thus, I think price-pullbacks should be bought.
So, basically, I couldn't disagree with Shawn more than I do but that's okay. I don't predict or forecast. Shawn might have a point but nothing the stock market, or the global financial market as a whole, is showing us that leads us to believe we will see a major pullback, let alone an 80% decline!
What we do is we position ourselves based on what the market is currently doing, because the vast majority of the time, whatever the market has recently been doing is what it likely will continue doing in the near-term. This is because price trends always have and always will exist.
The market was recently washed out and oversold which means it's very likely that even if we see bad economic news come out, it will cause a short-lived price decline, followed by more highs.