In 2017 I came with a blog «The stock speculator». Here I explained why I wanted you to play the market after subjective odds. Perhaps you have played poker. In poker it is important to know what winning odds your hand has at all times. Every experienced poker player knows this.
What has the market to do with poker. Above you can see the chart of the S&P 500 index the last half a year. As my earnings season theory suggests the market hesitant before the quarter’s start in December 2022. Last year I tried to analyze the prospects of the 2023 coming market. In my findings I found there had been only 4 times the market fell more than 1 year in a row since 1930. If you use statistics there has been less than a 20% chance of a 2 year bear market the last 90 years. A rally 2023 had a probability of 80%. Of course this is a simplified version of the world but how did it go?
The market January rallied big time. The odds were right, if you had played the odds you would have cashed in. Playing the odds 2023 seems a good way to play the market.
What other odds have I taught you the last years. My earnings season theory says there is a 60% probability of a rally from around the quarter’s start. Even this greater probability happened this year.
February 2. when the FAANG all had come with their earnings the markets tanked. The probability of the market correcting post earnings also 60%.
It seems 2023 to be the year of the odds. A market player acting on the odds this year would have made some good trades.
Not every year is like this. Sometimes the smaller probabilities market happen.
In the blog the stock speculator I tried to learn you always to make your own odds on the market. In the long run it is wise to play with the best odds, this a poker player would tell you.
I have also come with some other market wisdom, to always play the market direction commencing. If you have your odds on the market situation add your knowledge about following the market direction starting, would have been a good strategy 2023 as well.
Think like this. A 80% chance of a good year and a 60% probability of a rally January. When the train leaves the station in the start of the quarter jump on, a good chance of an earnings season rally. Think the same now approacing quarter 2.
Remember to put your own odds on the market throughout the year. 2023 the year of the odds.