Maybe, or maybe not. If we look at a chart of the Nasdaq from 07/20/2015 to July of 16* (*2016 and 2018 on Reports page) we’ll see a 20% correction and about a year of challenging market conditions.
As a note, this post on 08/21/2015, warned of a significant change in market conditions. Drawing attention to the post may seem a bit boastful, but let’s chalk it up to even a broken clock being right 2 times a day. Truly though, there was not much to this call as big moves on huge volume tell an obvious story.
If you view a Chart of the crash of 1987* (*1987 and 1999 Reports page) with this basic understanding of price and volume, an Investor could have been 100% in Cash at the very latest the day just before the crash, and likely sooner since there was a dramatic change in the behavior of the market as it was diving aggressively below it’s 50 day moving average (see this post for more information about the importance of the 50 day and 200 day moving averages).
Back to July 2015 to July 2016, maybe it can be suggested, that this time frame “reset” the bull market count (or what inning we are in, however the experts refer to the market) since this size of drop and duration had to see a fair amount of money moving out equities into other vehicles. So, when market conditions really improved, (particularly by Nov. of 2016), significant amounts cash were available to flow back into stocks resulting in very strong returns in 2017.
Year 2 of the Bull Market?
Considering this time frame as a reset, are we actually only in the second year of the bull market? Heck, I don’t know and I have no business making predictions, so I don't, but it is a nice thought.
However, if using the S&P 500 as the benchmark and it only corrected about 15% during this time frame, then by standard definition, it would be year 9.
The Start of 2018:
Typically, fear is a much more powerful emotion than greed, that’s why months of market gains can be wiped out in weeks if not days. However, it seems as if fear is the emotion driving the start of the 2018 market, not fear of loss, rather fear of missing the boat since 2017 was so strong. Accordingly, we are already seeing a very strong start to the year (* chart included - 2018).
My concern would be if the market starts moving too vertical, it could turn into a climax top(* 1999 Chart included) where investment for stocks runs dry and prices become unsustainable. At that point, stocks become susceptible to big drops, then fear of loss becomes the markets driving emotion.
The highlighted Asterisk (*)
Where shown above, indicates there is a corresponding chart (as well as "marked up" to provide a visual of specific movements discussed) that can be viewed on our free reports page located under the "Resources" tab at the top of our website. To download the Charts you can complete the information and press “Download Report” – and it will download as a .pdf
If you want the report but you are funny about internet downloads (I kind of am) and you are a Hebbeln client or Hebbeln client referral, just send me an email (firstname.lastname@example.org) that you’d like the charts emailed to you and I will send.
If you are not a Hebbeln client or referral, and you’d like the report via email, like most, I am a bit busy, so odds are worse than coin toss that I’ll send - if I am being completely honest, much worse.
If you've read this post, please keep in mind that I am not a Financial Adviser. Also, posts like this apply more to Small to MidCap stock investments (since equities of this size can fall out of favor and take significant amounts of time to recover, if at all) and probably not so much for mutual funds.