You should know by now that the best time to buy stocks as an investor is during periods of maximum pessimism. If you are a shorter term trader, the best time to enter a trade is “at the bottom of the envelop”. While neither of those situations exist today, it is a good time to prepare your watch lists and entry points.
For a couple of months we talked about the need for a correction- almost everyone expected it. The problem is you never know what external event would cause it. You know for sure when the words “nuclear apocalypse” came out on TV the froth was off the market. In fact, we came right through the bottom of the envelop! As usual, even those ready for the pullback froze- again!
For more watch my video below.
You also get extremely different readings on “overbought/oversold” when you change the timeframe of a chart. Today’s overbought readings looks very different to a longer term investor. Despite the overall market looking short term overbought to me- the longer term macro picture remains very encouraging.
- We are still just coming out of the lost decade
- The yield curve is steep
- People are still thinking recession despite the current recovery
- Valuations are modest
- The public is just waking up…
Get your watch list ready, levels and alerts set. When the bad news comes out, don’t use the four most dangerous words in investing: “this time it’s different”.
*DISCLOSURE: No relevant positions
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