This Can Never Happen In The Stock Market And That’s Why You Have To Know About It

It’s the only law of the investment world.

What’s the law?  All five assets CANNOT go up at the same time. Nor can they all go down at the same time.

There has never been a time in the past 300 years when all went up or down together.

This point matters.

IF the investor considers why an asset moves higher or lower, they quickly understand why all five assets moving up or down together is impossible if not exceptionally rare and short-lived.

The investor can get a very real and clear feeling of the market’s potential next move (read: correction or crash) by knowing the relationship of all five assets to each other.   

And this also means…

Investing should mostly be passive with small windows of activity. Because most of the time, the stock asset class is the place to be, regardless of age or risk tolerance. But there’s no camp called “mostly passive with shorter term active-ness.”  But when the stock asset class is NOT the place to be you must move.

Below is what happens before EVERY market crash.

The word EVERY is a bold word so anyone that uses it must be careful. Including me.

This one thing happened before the 50% 1974 stock market crash, the 50% Dotcom crash and the 58% Global Financial Crises crash. Everytime. And it DID NOT happen before the short lived 1987 market crash.

And when this (what I’m about to show you below) DOES NOT happen, the stock market corrections are shorter-lived in duration AND the price drops are shallower.

But when “it” does happen then (1) the time to get back to breakeven can get measured in years and decades AND (2) the price falls are measured with numbers that start with five’s and a sixes.

Let me show you.

There are five assets your saved wealth can be in: Stocks, Bonds, Cash, Commodities and Real Estate. There is not a sixth.

Generally speaking:

  • People buy stocks as a place of growth. Or when they think the future is stable and strong.
  • People buy bonds as a place of safety. Or when they are worried about the future.
  • People buy cash as a place of the highest of safety. Or when they are really worried about the future.
  • People buy commodities as an alternative to stocks. Or when commodities are clearly beating stocks on a relative & absolute basis.
  • People buy real estate to get money out of stocks/bonds/cash/commodities.

So…

If bonds are increasing in price and stocks are not then the investors of the world are collectively saying they are worried about the future. And that is why they are getting out of stocks and into bonds.

But if cash is beating both bonds AND stocks, then the investors of the world are collectively saying they are really worried about the future.

And this is why they are voting even more for cash then even bonds. Even IF bonds are also beating stocks.

Please understand the Cash Asset Class rarely beats the Stock Asset Class AND the Bond Asset Class.

But when cash is beating both of them,  then that’s a situation that cannot be ignored. Because it rarely happens.

So RC, how do the 4 assets look today (I’m setting aside Real Estate because it’s price isn’t able to be updated each day)?

To simplify I’ve deleted almost all the information in each asset price chart, all except the actual price of the assets, which you’ll barely be able to see because it’s in a light gray colored priceline (purposely done). But what you will be able to see an easy to notice 200-day exponential moving average.

Why the 200-day moving average matters to most…

Two reasons:

  1. The 200-day moving average shows the big trend of the asset. And…
  2. Because most investors follow this moving average.

I don’t follow it because it’s much less accurate than other moving averages. But since many people do follow it, I want to present the following four asset price charts with the most commonly followed moving average.

On all four price charts, gray will be the price of the asset and blue will be the 200 day exponential moving average.

1st: S&P500 w/ dividends reinvested
via symbol SPY (below)

One of the most dangerous things in the investment world is a flat 200-day moving average.

Why?

Because the underlying asset can go in any direction at any time. And that’s why the S&P is acting manic depressive right now.  

2nd: The Bond Asset Class w/ dividends reinvested, via symbol BND (below)

Notice how the 200-day is trending lower on BND?

That’s not so dangerous as we clearly know the direction this asset is moving. The moving average may be starting to make a move higher like it attempted to do in August. We’ll know more in the next few months if this asset is in fact finally going to start moving higher along with cash (US Dollars).

And IF bonds start trending higher while stocks are trending lower then that will be a significant sign that the investors of the world are seeing more danger ahead and moving to safer asset class.  

3rd: The Commodity Asset Class via the CRB Index (below)

Commodities were moving higher coming into 2018 and continuing to build strength. That changed in October when their biggest component (oil) dropped 35%.

As you can see, commodities 200-day moving average was attempting to move higher out its own sideway-ness but since October has broken down. And is now falling alongside stocks.

4th: The Cash Asset Class via the US Dollar Index (below)

Cash, that thing that most people don’t consider an asset is getting the most votes from the investor world. US cash is beating stocks, bonds and commodities.

Why?

The collective 500 million investors worldwide must be worried about the future. And just to be sure about their own future, they are putting some of their daily votes (read: money) into US cash.

As your eyes can see, the 200-day moving average on the US Cash price chart below has been moving up since May.

So many investors are are handicapped by the way the big-box world or the pick-of-the-month world wants them to think (read: complicated).

Both create complexity where none is needed.

But the pick-of-the-month-newsletter world makes things even worse by selling the dream of bitcoin millionaires, pot millionaires, China stock millionaires and gold millionaires. Or whatever the next “fill in the blank” millionaire idea will be.

Just look at  what Money Map Press is doing to people. Gaze upon the names of their 31 products, which are clearly displayed on their website.

It sounds like I made some of these names up but I didn’t.  I bolded my favorite investment newsletter names.

The 10-Minute Millionaire Insider

Private Briefing

Nova X-Report

Money Map Press

Fast Fortune Club

Energy Advantage

Stealth Profits Trader

Small-Cap Rocket Alert

Seismic Profits Alert

Radical Technology Profits

Money Calendar Pro

Money Calendar Alert

High Velocity Profits

Energy Inner Circle

Biotech Insider Alert

Zenith Trading Circle

Weekly Money Call

Tom Gentile’s Trading Circle

The Rick Rule Alliance

The Money Zone

Rapid-Fire Profits Alliance

Passport Fellowship

Night Trader

Money Map Resources Network

Money Map Project

Passport Club

Micro Energy Trader

Heatseekers

Cryptocurrency Windfalls (perhaps my favorite)

Black Diamond

Alpha-9 Trader

“Fear is the cheapest room in the house.
I would like to see you living in better conditions.”
– Hafiz

There’s a better way. A way without fear, overwhelm, the glitz of easy “rapid-fire profits” or “windfalls.”

And I’m willing to share it with you. Yes, you will have to pay but you are already paying and it’s creating angst, overwhelm and stress in your life.

There’s a better way.

In Your Corner,

RCPeck-Dig Signature.JPG

RC Peck, CFP

P.S. There’s a better way to invest. And I’m willing to talk to you one-on-one about it. But there really isn’t much time left. Get on my calendar and we I can show you where you portfolio is leaking.

P.P.S. The Fearless Wealth Method is as much the art of keeping yourself sane in an unfair and overwhelming world as it is a way to protect your money and future. Take the leap of faith and let’s talk about what’s really going on with your money. This is the easiest way.

Subscribe to RC's Weekly Investment Insights