Stop. Take a step back. Look around.
We’re in the middle of a bull market in equities – and not just in the U.S. mega-caps that kicked things off.
Participation is broadening. It’s global. And it’s finally spilling down into the smaller names that had been sitting on the sidelines.
That’s exactly what you expect in a healthy bull: Leadership starts with the early winners, then more and more stocks join the party as the trend strengthens.
That’s what’s happening right now.
They Were So Wrong
Not everybody gets it right.
In fact, the strongest bull markets of all time start when almost no one expects it.
Take the current cycle, for example.
The Dow Jones Industrial Average bottomed out in September 2022. The S&P 500 put in its low in October of that year. And the Nasdaq didn’t find a bottom until the end of December of 2022.
But the list of stocks making new 52-week lows peaked in June 2022. By the time the indexes made their final lows, the majority of stocks were already on their way up.
Most investors don’t bother to count. So this is one of those cases where my ability to count was really helpful.
We knew the markets had turned. I even told Maria Bartiromo in mid-October that we were in a new bull market and that we had to be buying stocks.
This was on Live television on October 14, 2022. She looked at me like I was crazy.
As 2023 approached, Wall Street analysts all came out with their predictions for the coming year, as is tradition around their antiquated systems.
But for the first time this century, Wall Street agreed that the S&P 500 would actually fall in value throughout 2023. In fact, a recession was practically guaranteed, according to economists.
Well, not only did the market NOT fall in 2023, the Nasdaq literally doubled from there.
The S&P 500 went on to put up back-to-back 20%-plus years in what turned into one of the most historic rallies of all time.
Again, this was after Wall Street analysts were at consensus that stocks would fall.
Mathematically, they could not have been more wrong.
I tell you this story because that sort of divergence rubs people the wrong way. They don’t like how badly they messed up, and that’s where the blame-game starts.
A bubble is basically a bull market that you don’t own.
And a ponzi scheme is a stock going up in price that you’re not smart enough to understand.
This is how humans justify their poor choices.
My three-year-old niece tends to cry when she gets confused too. She reminds me of the adults behaving like babies when they miss bull markets.
You see, not everything that you’re not smart enough to understand has to be a ponzi scheme, or a house of cards, or a bubble.
If you actually take the time to count, you’ll notice that this is just a regular bull market.
It’s not the best one ever, it’s not the longest one ever, it’s not the worst or shortest one ever either. It’s a pretty standard bull market so far.
In fact, in terms of both duration and amplitude, this bull market, by all historical measures, still has room to run.
In other words, there is still more upside, and this can take a lot longer, just to get to average bull markets.
That doesn’t make it a bubble or a ponzi scheme. It’s just a bull market.
During bull markets, stocks go up quite frequently. And investors who own stocks during bull markets tend to make a lot more money than investors who do not own stocks.
So I encourage you to stop, take a breather, and look around. This is what a bull market is like.
At some point, we will begin to see breadth deterioration, leaders start to drop off, rotation into defensive areas, and evidence of distribution among equities.
That has not happened yet. It will. But we haven’t seen it.
And just because you haven’t seen it yet, and this bull market is exceeding your expectations, doesn’t mean it’s a bubble or a ponzi scheme.
Maybe it just means that you’re not good at identifying bull markets.
Maybe you should spend some more time counting and less time complaining.
What Is a Supernova?
I’ve been thinking about supernovas quite a bit recently. I have three kids, so we’re constantly talking about space – things like the moon, the sun, stars, and planets.
I like science. My kids do, too.
But it’s the supernova phenomenon that has my attention these days. This is the largest explosion that takes place in outer space, second only to the big bang.
The explosion can be seen for weeks or months at a time.
This resonated with me right away because of the way we approach markets, especially here at TrendLabs.
I’m not interested in a 4% return. Why would I bother getting out of bed for something like that?
We’re looking for 300% returns. You guys who’ve been following along this year have seen that occur, and much more.
I don’t want a little spark to my portfolio – I want to see it blasting off into space – like a supernova.
Also, what really got me was the time horizon. A supernova can be seen for weeks and months – the exact same amount of time that our trades tend to last – weeks and months.
I own real estate. I have my long-term portfolios for our retirements and kids college funds. Those are not the things I’m talking about here.
At TrendLabs, I’m specifically looking for supernovas.
I never really thought about it like this, but the more and more I learn about supernovas, the more it hits me that what we’re doing here is exactly that.
We’re looking for the next Supernova Trade.
I mean, the biggest explosion in space – second only to the Big Bang?
Come on. That’s so cool!
Stay sharp,
JC Parets, CMT
Founder, TrendLabs