As I have stated a time or two hundred, the real key to long-term success in the stock market is finding a way to ride the bull market waves and then trying your darndest to avoid being brutalized by the bears.
One of the best ways to accomplish this seemingly difficult task is to understand that the market moves in cycles. No, this will not be a discussion of the Elliott Wave or even the cycle composite we review on a daily, weekly, and monthly basis. In this instance, we will be looking at bull and bear cycles and some signals that can help put investors on alert for when a bull is about to end.
But first, there is one additional caveat that needs to be addressed. Remember, no one rings a bell when bull markets ultimately top out. And trying to top-tick a move that generally lasts years is a fool’s errand. This is why so many investors are ill prepared when a bear begins. The key is to understand that the research presented is designed to be a warning sign and NOT a signal to sell everything and hide under your desk.
Warning Sign #1: 52-Week Highs
In case you are not aware, new 52-high and low totals are considered some of the best leading indicators of major trend changes. Yes, this is old-school stuff. No, it isn’t fancy. But it does work!
David Moenning is the founder and chief investment strategist for StateoftheMarkets.com, a website dedicated to investor education and portfolio analysis. Mr. Moenning is also President of Heritage Capital Management, a privately owned, investment management firm. Founded in 1989, Heritage is focuses on risk management and an “own the best and ignore the rest” equity selection strategy.
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Positions in stocks mentioned: none
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.