I’d say that for at least 6 times already this year, the market has declined almost to that place where I was getting ready to jump in with more cash. I say almost because I employ some ‘baker’s dozen’ of technical indicators to attempt to measure market risk. When the preponderance of those technical measures get to that place where I think they are signaling to me that most of the market risk has been wrung out by the most recent decline in share prices, I then begin to look for that upside reversal that signals to me that a bottom has likely been put in, and I can be rather aggressive about deploying our cash into more shares of our favorite safe-dividend growers.
Some 6 times already in this year they’ve started to get pretty close, and I have begun to sit on the edge of my chair, and to start to construct my shopping list of what I am wanting to buy… and every time, so far, the market has reversed ‘prematurely,’ as I would put it, and gone on a tear without my jumping aboard.
Now, let me explain why I’m getting more concerned. One measure of market risk is the fear gauge known as the VIX. It’s a measure of options price volatility on the S&P 500. As this last decline got going, and even started getting into a place where fear should have been expected… there was very little. Further, it’s common that as prices decline that selling volume would pick up as traders flee the market. There was little by way of volume. This leads me to a conclusion that things are likely to have to get considerably uglier here in the near future, before a truly goodly market bottom is put into place, and a measurable (by my technical measures) ‘low-risk market entry opportunity’ presents itself to us.
I think it’s going to happen. I think it’s going to happen this Fall… and I think it might be a real ‘duesey,’ in order to instill some serious market participant fear into the situation, and it will likely be marked by some serious selling volume, as well. Why do I say that? Periods of low volatility, such we have seen for quite some time; also accompanied by stocks trading in a relatively narrow channel not 5% wide, is going to, at some time, break out of that narrow channel. It’s going to break to the upside or to the downside. When it does, there’s going to be a lot of market participants who will see that, and go with that breakout, which will exacerbate or accelerate it.
If it should be to the downside, fear will rise and volume will increase greatly. And, best of all, I’m certain my technical measures will finally be put into place. It would look a lot like a replay of last Fall, I suppose. If it should break out to the upside, without there being some detectable bottom and low-risk entry being put in place first… it will be tough, but if the upside volume is there, it will probably be necessary to also participate, lest the train leave the station without me.
So, with the market off to a downside start to the day… I PRAY it will finally and fully play out to where I can get an all-clear, low-risk market entry signal, as my wife and I have just sent off another check to brokerage to bulk up our cash position some more in anticipation of another opportunity to safely grow our portfolio dividend income by the acquisition of more shares of the very safest-dividend growers to be found in all the world. I don’t want the market to take-off yet… I HATE IT when that happens!!!
Here’s to your successful stock market investing!
Harold F Crowell