We have had a 4 month rally following the sideways market movement mid 2019. I have on several occations given you different frameworks to help you investors try to predict the market. In this blog I will discuss these different frameworks and try to help you make sound Investment decisions forwards.
In the illustration above you can see the sideways market movement from April to October last year. A lot of investors wondered to go long or perhaps short the market. My regular Readers may recall my Trending Sideways post from January 2017. My advice was like this, quote “When a sideways market follow the new direction when it commences”. This strategy in October last year would have given you a 15% Nasdaq Return.
One of my main contributions on this site has been my earnings season blogs. I have tried to build up a framework where the earnings season is the main structure in the Marketplace. In The earnings season perspective to Stocks I lined out the market to be four different earnings Seasons forming a full year framwork to the Stock market.
As the chart above illustrates we find the different phases of the earnings season in all of the 4 quarters 2019. Quarter 2 has a Nice rally in April, the earnings season rally, which ends up in a deep correction in May and With a rally June. Quarter 3 Has its earnings season rally in July, With correction in August and a slight rally in September. The last quarter of 2019 was a long rally all together.
January ended in a slight correction. What now in February? As my explanation above suggests, the second phase in the earnings season perspective to Stocks suggest, a correction like we had in May and August last year or a rally like we had in quarter 4.
As I have explained in several prior blogs now it is the job of the investor to follow the market direction commencing post the earnings season rally. The market has allready been a little bit weak so be prepared for a possible correction. But not Lock yourself into guessing the forward market better follow the direction starting now, post the earnings season rally January.
This was a very successful strategy in some of my first blogs when I tried to give you a framework around the US Presidential Elections. For you Readers I had back then, following the market direction post the Election in 2016 would have been a wise plan. Of course there has been a lot of reasons for the market bull the last years which have nothing to do With the election.
The earnings season perspective to Stocks framework I have given you to understand more of the Marketplace. In this framework it is possible to give different future predictions of the market. It is of course not bullet proof in predicting but more a framework for the investor to understand what is happening in the market throughout the year.
Good Luck With Your February Investments!