It's that time of the year again. They all keep calling and emailing me asking for my "predictions" for 2020.
What do you want me to say?
I have no way of knowing what's in store for next year, yet alone what to expect in December of 2020. And I think it's really important to reiterate that. This idea of the unknown unknowns gets lost in the shuffle.
Sure, we were fortunate to make some good calls this year. Our customers have only sent us positive feedback. But as Babe Ruth once said, "Yesterday's home runs don't win today's games".
In my opinion, the reason people have been so bearish towards stocks and fighting strong trends is because they're allowing other biases influence their decision making. Whether they don't agree with the Fed, or the Trump, the direction of the Economy, or whatever it is, they're choosing to give more weight to these "opinions" than they do to price itself.
Fortunately for us, we're 100% data driven. So we don't care who the president is. We ignore everything the fed says and does. We assume anything a journalists creates is gossip, whether it is or isn't. And we certainly don't have time to care what the economy is doing.
So because we are so trained to focus on actual data, it's a lot easier for us to ignore those whose job it is to distract us. It's not "easy", but it's definitely easier for us as technicians than it is for most of society. The fact is most people are unaware, or choose not to care, that they're consuming content produced by those with ulterior motives. They're just here to sell ads to their sponsors while we're only trying to make money in the market. It's a big difference, and it becomes a problem.
I was down Philly last week chatting with Wharton Professor Jeremy Siegel, WisdomTree's Jeremy Schwartz and Tim Hussar of WhartonHill. This was a lot of fun and I thought we had a great discussion about what to expect for stocks and bonds in 2020. PHD Liqian Ren was also there and asked some great questions about rotation into emerging markets and how we try to incorporate alternative data into our analysis.
This was my first time visiting the Wharton School and it did not disappoint.
Hopefully I wasn't too hard on Professor Siegel and Tim Hussar and they invite me back on sometime!
This episode was live on SiriusXM and will be replayed several times over the holidays, but here is the podcast version of it so you can give it a listen at your convenience:
I love how people still think we're in a 10-year bull market for stocks. This lack of understanding of basic reality is one of the many catalysts, I believe, that will take stocks much much higher.
The greatest trick the market ever pulled was convincing investors it's been in a decade long bull market.
The best part is that nothing could be further from the truth.
When we talk about "Stocks", we have to recognize that "Stocks" are an asset class. It doesn't just mean the S&P500 or Dow Jones Industrial Average. This is a global stock market, and becoming more of one with every day that passes. Those of you who have been reading our work for years know how valuable that information has been to us for so long. Today is no different.
Look at Europe doing nothing for 2 decades and now starting a new bull market:
Before we get in to stocks and charts, I just want to thank you for your support all these years. It really means a lot to me. Today I noticed I had 61.8K followers on Twitter! How about that? Leonardo Fibonacci would be proud!
This was my first week back living on the east coast. My 2-year plan to be in California turned into 4.5 beautiful years in Sonoma Valley. This was after spending 15 years total in the northeast between college in Fairfield, CT and over a decade in New York City.
I keep getting asked, "But JC why would you ever go back???" (this is happening at least several times each day).
People don't like it when I tell them we're near the beginning of a new bull market in stocks. For some reason, they prefer that cozy feeling of going to bed thinking stocks are near an important high, and they've somehow outsmarted the system by selling stocks in uptrends instead of buying them.
I'm convinced some of these people must be looking at their charts upside down.
Anyway, let's take a look at the markets so I can show you why I think we're closer to the beginning of a new bull market and not near the end of an old one:
Annie Duke is the author of one of my favorite books, "Thinking In Bets". I often find myself recommending it to both colleagues and friends and family who aren't even in our business. While the book might be written by a poker player, and is somewhat about poker, it's really about the way we think, and this applies to market participation, but also life in general. It's a book I believe everyone should read, at least once.
In this Episode of Allstarcharts Weekly, Steve and I discuss the less talked about tenets of Dow Theory. Everyone always likes to talk about the Dow Jones Industrial Average either confirming or diverging from the Dow Jones Transportation Average. But what gets forgotten is that there are many more tenets like Closing Prices are the most important, Identifying the direction of the Primary Trends and The Market Discounting Everything. Check out JC's 5 Most Important Dow Theory Tenets
This day and age we have other areas just as important, or even more important, than a group of Railroads, like what Charlie had when he first wrote down his Tenets in the late 1800s. Today we also compare the Dow Jones Industrial Average to the Semiconductor and Homebuilders Indexes as well as incorporate a series of ratios with Consumer Staples and Financials. It's more of an "and" than an "or" for us when it comes to Dow Theory.
We just got back from 6 days in India and I think it will add some value to give you some perspective on the kinds of things we learned. Sean McLaughlin is our Chief Options Strategist and had never been to Asia before. This was an eye opening experience for him and one that reiterated a lot of important things I noticed in my prior visits to Mumbai.
We attended a CMT Conference, we filmed a documentary on Indian Options Trading, we ate some of the best food this planet has to offer, we hung out with some of the nicest and coolest people know and got to learn a ton from everything around us. I love going to Mumbai and it’s so nice to see the rest of the gang enjoyed their time there as well.
The Nifty 50 and Nifty 500 are back at the top of their multi-year range right as we're starting to see signs of exhaustion in various global markets.
Failed breakouts and bearish momentum divergences help us to identify potential reversals in the market and we're seeing a few of them occur in India and elsewhere.
