Could now be the perfect time to get back into the markets? Stock market predictions are not easy. Its no secret that the world markets have been hammered this Summer (2015), and well, really all year. For now I’m just going to focus on the North American markets, mainly the New York Stock Exchange, Dow Jones Industrial, NASDAQ Composite and Toronto Stock Exchange. Mainly because these are the markets I primarily invest in and follow. Maybe someday I’ll get into the European market, but that ain’t today!
The part you already know is that the markets have been in a free fall for most of the Summer. First it was Greece, then it was China, both giving abysmal signs of any kind of market stability. Greece is bankrupt, again, and to me I don’t know why everyone keeps freaking out over it. They received their 3rd bailout is recent history and I even remember after the 2nd bailout people were saying, “this won’t fix anything, its going to happen again.” I think they’re even saying it again now. China is an odd duck too, as their manufacturing was through the roof, then all of a sudden plummeted like nobody buys anything from there, or makes anything there anymore. Both statements couldn’t be further from the truth. Its not an old saying, but its a common one that everybody knows, “everything comes from China.”
Regardless of my one sided, misinformed knowledge of these situations there is a pattern that’s happening right now that’s worth noting. The only problem is that it might already be too late, but bare with me for a moment.
The markets are sometimes good at showing you what’s about to happen. They’re also terrible at it. Really, the market is a sociopathic, schizophrenic entity that you somehow think you can control from time to time. Sometimes there’s a gleam of understanding, and for me that’s when there’s double resistance in the markets. Double resistance occurs when the markets either hit their current bottom, or top… twice. Its like the market engineers try to push more power out of the old girl (at the top) and the market just can’t support it and buckles afterwards. Or, when all hope is lost (at the bottom) the market shows signs of a turn around by rejecting the floor, twice. It actually happens a hell of a lot in the modern market.
Here’s a graph showing year to date (YTD) comparisons of the Dow Jones Industrial (DJI), NYSE Composite (NYA), S&P TSX Composite (OSPTX) and NASDAQ Composite (IXIC) indexes. The red arrows show double resistance for the peak of the year and the green arrows show the double resistance for the bottom. If you look closely you can find other areas where this happens on a smaller scale, but those are much harder to pull predictions from. The areas outlined in this image are huge levels of resistance.
There was a definite ceiling hit back in late June and early July and boy oh boy did it come tumbling down after that. Right now though, almost in the same amount of time, but a little longer, there is a double bottom on the markets. The 2nd “bottom” was on Thursday. That’s kind of why I hinted at the fact that it might be too late for this rebound, to really cash in. I’ve had some investments already return 5-6% since purchase about a month ago, just in the last 2 business trading days.
Will the markets keep going up, or will we bit hit by another downturn? I’d like to believe the worst of this year’s economic hardships are over, and if my theory of double resistance has any breadth of truth in it, then it will be at least a little while before we see any new big slumps.
I’m no expert in the markets, I’m just an investor who likes to share what he’s learned. I’ve been investing for over 5 years and watching and learning that entire time. Could now be the perfect time to get back into the markets? No, that was last Thursday, but, that being said, there’s still room to make some money in the near future. Or, at the very least, use this as a learning experience and see what happens next.
Update January 20, 2016: So the markets are a total wash right now. Its worse than anyone could have expected… except the conspiracy nuts. Damn you! Either way, every day now seems like the time to get in, but then the next day (or week) is somehow even worse. Regardless, there are still good buys out there, stay frosty! And I am aware of the hubris I have gained by writing this original article then watching it come not even close to true. What can I say? I don’t know it all, I’m still learning, just like you. 🙂