Makets closed today: Seeking a trend
If you're one of the lucky people to get a day off for President's day, read a book. (Most people won't read a book). Of course, the great majority of people don't get the day off. Only if you're a government worker or banker. So read book. All, and I mean ALL, successful people are voracious readers. In fact, your goal should be one book a month, on your way to reaching Bill Gates' goal of one per week.
First, let's look at the trend of the market. There's an old saying that the "trend is your friend, until it's not." Let's look a the daily trend of the S&P 500, which represents 500 stocks. I'll use the SPY EFT, which is an index of those 500 stocks.
That's a pretty good trend since late in 2018. That's a nice eight-week trend. If you missed that trend, don't fall into the "should have" trap. There will be plenty more. Patience is the key to successful investing.
But how do you know when the right time to invest would be? There is no hard and fast rule. Most of it is based on experience, and even the most experience investors are wrong some times. But they use tools in improve their probability of success.
Let's go back in time to the market downturn in December 2018.
Here's a down trend that was broken with higher prices. Looks good on paper, right? And in this case you'd be right. However, not all trends are so clear cut.
Identifying the trend of a market or stock is vitally important in choosing when to invest, or when to sell. Only the most risk adverse investors or traders can stomach a contra-trend trade (trading against the trend).
There are other important indicators, which I'll go into future articles this week. But keep in mind: 1) is the stock selling at retail prices? 2) are the moving averages moving in your desired direction? and 3) can you identify supply and demand on the chart, which indicates whether the big boys, such as banks and institutions. are buying or selling.
But most importantly, have you done your homework? Is the stock (or market) worth investing in. Don't invest in in something you don't understand, a stock that is not making money (and growing that money) and don't buy at retail. Buy it on sale.
Just like buying a car (or a pair of shoes) get the best price you can.