Patience is a virtue and is a skill which can take many years to master. Warren Buffet once said: “The stock market is a device for transferring money from the impatient to the patient” and it’s hard to argue against the oracle himself!
Since COVID-19, the finance sector has had a mass influx of new investors, which has seen the daily volumes increase substantially. It is even prompted ASIC to release a statement last week warning retail investors of the warnings around investing. So, with this influx of new traders, what does all this mean?
It means that the stock market is being propped up with new investors who are jumping in head first and focusing on short-term results leaving them bitterly disappointed when price goes against them. This in turn has created what we call the classic bear trap, where it sucks in investors to buy expecting a V shape recovery for eventually the market to roll over resulting in greater downside and losses. Yes, it’s like 5th grade when you're close to getting accepted into the cool kid gang, to then being cast aside when captains pick the basketball team! But let’s not digress around cheesy analogies, just yet.
Anyway, we know from history that typically when a market falls rapidly it falls in two waves. Technical analysts refer to this as the Elliott Wave theory where we have a Wave 3 which is the biggest drop, followed by a Wave 4 recovery (bear trap) and then to a Wave 5 down which extends past the Wave 3 bottom. Only when the Wave 5 completes that we get to see the bounce.
What makes this market harder to understand is that most economies are propped up on stimulus at the moment, loan deferrals and other cash incentives however, this is just delaying the pain as eventually this will need to be paired back! JobKeeper is great and all, but it’s just a short-term fix to delay the inevitable which is high unemployment and low wages growth which at the moment is impossible to predict where those figures will actually land!
So, it is really hard to make any decisions about investing as we have no real understanding of the economic future, let alone address what affects they will have on an individual company. Therefore, until we can have a greater understanding of the future we will remain in this current volatility and whipsawing markets.
Bloody Coronavirus! I have kids to feed, the toilet roll stockpile has run out and the internet bill is through the roof! How can I make money in this environment? Patience, patience, patience and enter sales pitch - Jaaims Active Portfolio Management Technology to the rescue! The beauty of Jaaims is it analyses the micro and macro economic factors as well as the individual factors associated to each equity every 15 minutes and uses this data to find the right time to buy and sell! It is also our patience that we have instantly acquired…credit card required!
Jaaims’ philosophy isn’t to pick the bottom or the top, it is to make the profit in the middle being patient and waiting for the right time to enter. Our standard subscribers also get access to the Power Rating feature which identifies a major trading opportunity. This will not be triggered in this environment but when they start to appear it is an indicator that Jaaims’ outlook is changing …and when that happens, it will be a sign to dust off those dancing shoes as its time to boogie!
Learn more @ jaaimsapp.com