The stock indexes continue to trend lower, and we have today’s weak close as week two of a four to five week crash run to test and eventually break below the 200 day moving averages for the stock indexes (purple lines in the charts below.) The AK Trading Indicator will confirm this bear trend either Monday or Tuesday, even with a stock market rally those days. This indicator is sometimes early, sometimes late, and sometimes spot on. The key is to ensure the average profits on the winning signals swamp the losses suffered on the whipsaw failures. Risk of the recent reversal has been extreme for a very long time, and the only way to avoid large losses over the past couple of weeks was to be very conservatively invested in-line with the uptrend, and that is exactly how we were positioned. There are times to get aggressive, and there are times when caution and portfolio protection is more important than shooting for the big win.
The next couple of quarters should offer many great opportunities to profit on the short side, and as cycles are set to turn negative going into February, we have the green light to aggressively trade these opportunities in a big way.
Conservative and 401K investors should sit out these bear corrective cycles in cash (money market funds,) and worry about perfecting the golf swing while everyone else sweats the ups and downs of trying to catch a falling knife. These are great times for aggressive traders, though you have to be able to stomach the up and down volatility that is sure to come, especially when leverage is used.
There are many ways to compare investing for those who haven‘t figured it out yet, from boxing’s “every champion is going to get hit many times before he lands the big win knockout,” to baseball‘s “even the greatest hitters only hit the ball 4 out of 10 times,” to football‘s “don‘t tell me the score after the opening drive, tell me the score going into the final two minutes.” No one likes getting hit, struck out, or scored upon, though winners take these events in stride, and come back for more.
The results of the AK Research project gives us the tool to know we have the best players, coach, and tactics to get the job done, and since we‘ve tracked every other known approach along side ours, we know for a fact there is no better way to making consistent and persistent profits over the long term in the stock market. Often it won‘t be pretty, though testing shows we will have as many good times as we will bad, and the key is to make sure those good times leave us on top when the final end of year whistle blows, no matter what happens throughout the year.
Thus I am more excited about the possibility of profit now the go-for-it green light has been lit, rather than being disappointed that the last trade turned out to be a mediocre blah loser one. 2008 was a year where even conservative investors sitting in cash could feel extremely good about their portfolio returns, and the key is to think long term rather than get bogged down with the disappointments, with making sure one is there for all the big moves while stepping aside - or scalping - the vicious bear swoons that kills every other investor and strategy job one.
Rally on Monday/Tuesday; plunge on Monday/Tuesday - either way we will be going short (401K traders to cash when the signal says to) with the only question how much money we leave in cash versus how aggressive we are able to be at the outset of what may prove to be one of the greatest crashes in the history of the financial world. If at any time I feel the AK strategies are failing their research promise then you have my word I will tell you straight up. Right now, I say “Game On!”, and that our strategies are working perfectly.
Have a great weekend!
401K investors should have ½ of their portfolio invested in a stock index, or aggressive growth, mutual fund, with the other ½ remaining in a money market fund.
The Index portfolio is ½ invested in QQQQ with the other ½ remaining in cash.
Kevin Wilde, Chief Trading Strategist, AlphaKing.com
