Remember all those bullish studies market pundits were passing around in early January? Do you recall the parroting about “how goes January, the rest of the year follows?” It’s easy to forget, but many market strategists were falling all over themselves bullish just a couple of weeks ago (see Parabolic Moves Don’t End by Going Sideways).
Now, some 300 handles lower in the S&P 500, many of these same forecasters are talking about the extensive technical damage and advocating caution.
I am not here to pick on any pundits – I subscribe to the Yogi Berra school of forecasting – it’s tough to make predictions, especially about the future. But I take issue with one major aspect of the current investing environment. Most market players are using the playbook from the last few decades in their forecasts. They are mistakenly thinking the rules of the game haven’t changed.
Their predictions from last month are still ringing in my ears; low volatility January rises have been followed with stock market strength, so there’s no way anyone could predict that stocks would swoon 10% in a week and a half for no real reason at all. Yet that’s exactly what they did.
What’s different today?
I find myself hesitant to type out these next few lines. As I struggle to find the words to communicate my thoughts, I worry they will be misconstrued. Yet I don’t know how else to say it – except to blurt it out. So at the risk of being labeled a fool, here it goes – it’s different this time.
Yup. I said it. I committed the cardinal sin of investing. I uttered the most expensive four words in the history of markets.
Before you call me a Luddite and hit delete on your email or click the home button on your browser, hear me out.
…click on the above link to read the rest of the article…