Monday, November 5, 2018

Multi month stock market rebound possible | Sell stocks on Strength

The markets have been wonderful for a while but Marc Faber thinks its time to get worried. In his latest November Market Commentary he states his cautious outlook. 

"Under the heading First Phase of a Bear Market, Joe Granville writes that, “Bear Markets never visit by appointment, ringing your front doorbell during the daylight hours. They come like a thief in the night, sneaking in the back door while the public sleeps the slumber of confidence."

In my opinion, equities around the world have made an important high between 2016 and 2018. In the case of the US, the orthodox top was probably on January 26, 2018 (S&P 500 Index at 2872). Marginal new highs occurred among various indices between late August and early October 2018 but were not confirmed by the majority of stocks. A rebound lasting a few months is now possible given the oversold condition but new highs for the majority of stock markets around the world are most unlikely. The strategy should now be “sell on strength” and not “buy the dip,” which was the right thing to do since the March 2009 low.

I should warn my readers that the Wind of Change may bring about the end of the Great Asset Inflation, 1981 – 2016/2018, which inflated all assets including bonds, stocks, commodities, precious metals, properties, art, collectibles, etc. We may enter a period where asset prices stagnate or decline. This would imply a change from asset inflation to asset deflation."