Monthly Archives: April 2018

Volatility is normal and unavoidable

Chris examines most traders tendency to focus on the short term and in the end they lose money trying to avoid volatility. It’s impossible to make money consistently if your goal is always to avoid volatility. Over trading trying to avoid drawdowns will only cost you money. Drawdowns are a normal part of this business and impossible to consistently avoid. And one doesn’t have to avoid them to make money. Most amateur traders never learn this lesson and most never consistently make money. Every trader in the challenge, and that includes all 5 leaders has experienced drawdowns, even significant drawdowns. Yet they are still making good money.

The larger trend is up and has been for 9 years. In a secular bull market, which we are in, the larger trend will remain up for 20 or more years. You can let the larger trend work and make money or you can get sucked into whipsawing your portfolio by attempting to dodge every wiggle on the path higher.

Bears are constantly looking for the next trigger that will start the bear market they’ve been anticipating for the last 9 years. But secular bull markets aren’t driven by QE, or low interest rates, or share buy backs, or the absence of geopolitical events, etc. etc. This is why none of these things have halted the bull market. The latest excuse is the conflict in Syria.

Bull markets are driven by new technology’s. Wars don’t change or stop the advance of technology. The first gulf war had no long term effect on the last bull market. Why? Because it didn’t stop the development or advance of the personal computer or internet.

We’ve had tsunamis, Greece, Brexit, end of QE, the beginning of a rate hiking cycle, threats from North Korea, etc. etc. and now a conflict in Syria. None of these things have had or will have any long term effect on the market. Why? Because this bull market isn’t being driven by anything that can be affected by these kind of short term news events.

This bull market is being driven by new discoveries in biotech, robotics, nanotechnology, transportation, alternative energy, etc. No geopolitical event is going to halt these technological advances.

10 week moving average

Most of the indexes made their first test of the 10 week moving average this week. A close above should confirm an intermediate uptrend. The next step will then be to turn the average back up.

Successful retest

I while back I speculated that too many people were expecting an undercut of the February lows (including me), that probably meant we would not get it and most people would get left behind as the next daily cycle started moving back up.

Turns out I was correct.

The parabolic phase is probably off the table as this correction chewed up too much time. That implies the long term bull scenario is probably the correct one and we still have 10-15 years before this secular bull is finished.

10,000 will be a piece of cake (before this 4 year cycle tops, probably in mid 2019). And if we still have 10+ years to go, 20,000 or even 30,000 should be easily achievable.

The previous secular bull took the Nasdaq from 110 in 1980 to 5100 at the top in March of 2000. A gain of 4500%.

Even if we assume a more modest bull market and only a 2000% increase over a 20 year span that would still take the Nasdaq from it’s humble beginnings in the depths of the financial crisis  at 1200 to 24,000.

The perma bears have managed to miss all of the bull market so far waiting for the next shoe to drop. If they try hard they may be able to talk themselves into missing an entire 20 year secular bull market.


Contrary to what some self proclaimed gurus would like people to believe. The monetary crisis isn’t going to be in the euro. It’s going to be in the dollar.

Ultimately I think this will generate enough inflation to trigger the next recession, probably in 2020-21.


What the perma bears fail to understand is that we are now in Kondratieff spring. These people are living in the past. They’ve been waiting for the next shoe to drop ever since 2009. But during spring we don’t get big nasty, deflationary bear markets. During Kondratieff spring 4 year cycles are right translated. Yes at some point we will have another recession but it’s going to be mild and it will correspond with a right translated 4 year cycle so it will be short.

By the end of the day the bears will be scratching their heads wondering why the market didn’t crash on the soft employment report. It didn’t crash because the daily cycle bottomed on Monday. We are however caught in a trading range and probably will be until after the June rate hike. That means it’s going to be difficult to make money during the first half of the year. The second half should be easier.

I’ll say it again. 10,000 is going to be a piece of cake. We will get there before this 4 year cycle tops (Probably in mid 2019).

Caught again

The perma bears got caught on the wrong side of the market again right at the bottom of a daily cycle.

We have a successful retest of the February lows.

At this point I’m about 90% convinced that the parabolic phase is off the table and the long term bull scenario with 10-15 more years to run is the correct call.


Challenge results for March

Markets have just been whipsawing since January and nobody has made any appreciable progress over the last two months. The results are pretty much the same as they were at the end of January.

#1 Dennis G +377%

#2 Bob S +235%

#3 Troy S +199%

#4 Daniel M +182%

#5 Adrian S +161%

The SMT metal portfolio is up 78%

The SMT stock portfolio is up 40%

On a side note the SMT Quest portfolio is up over 1300% but we use options in this portfolio and one of the rules of the challenge is no options.