Gone are the days of passive investing, but...
Gone are the days of passive investing, but mid-term trading could be the solution.
The term passive investing was first made famous by Warren Buffet, who once said, 'If I like a stock, I will hold it forever.' However, in recent years, he has been seen cutting losses on his wrong decisions and taking profits when he finds the time is right. The dynamic of the markets have changed, and he has adapted to them.
Technical Reasons -
From the chart, it's clear that the days of passive investing are behind us. We can refer to the Dow Jones or S&P Index; they provide similar readings as Nasdaq, although Nasdaq has a shorter history.
Since the beginning of 2022, the great volatility started with a year of bearishness. In my opinion, this could be a start of a long-term bear. What we are seeing in 2023 rally, possibly a bear retracement.
Let’s support my analysis with the fundamental factors.
3 Fundamental Reasons –
• Why did the decades of long-term growth, forming a linear bull market, come to an end at the beginning of 2022?
This is because it marks the beginning of long-term inflationary pressure that we all have to contend with. To counter inflation, one of the most effective measures is to raise interest rates. As we all know, higher interest rates bring challenges to businesses and stock markets.
Please take note of the timing. Inflation first exceeded 2% in April 2021, and since then, it has been on an upward trend, something unprecedented in the last 40 years. However, the Federal Reserve only began raising interest rates in March 2022, while the markets peaked at the beginning of 2022.
Consumer Price Index
Feb 21 1.68%
Mar 21 2.66%
Apr 21 4.15%
May 21 4.94%
Jun 21 5.34%
Jul 21 5.27%
Aug 21 5.21%
Sep 21 5.39%
Oct 21 6.24%
Nov 21 6.83%
Dec 21 7.10%
Jan 22 7.53%
Feb 22 7.91%
Mar 22 8.56%
Apr 22 8.22%
May 22 8.52%
Jun 22 9.00%
• Why did the market turn bullish in 2023.
Many attribute the rally to AI, but it goes beyond that. By the end of 2022, the market was still hovering around its lowest point. However, as seen in the inflation numbers below, there was a gradual decline from 9% in June 2022 to 6.5% in December 2022, creating a divergence between this positive news and the market's performance. At that point, I was preparing for a bear rebound or retracement. Of course, the inflation number continued its decline to 3.2% in October 2023, and the rally has continued until now.
Continue Price Index
Jun 22 9.00%
Jul 22 8.50%
Aug 22 8.30%
Sep 22 8.20%
Oct 22 7.70%
Nov 22 7.10%
Dec 22 6.50%
https://www.tradingview.com/chart/NQ1!/zNH28vLR-Nasdaq-Short-term-bull-Long-term-range/
• Why have the days of passive investing come to an end?
Unless inflation can back down to 2% in a sustained manner, we should expect to see much more volatile markets in many years to come. Traders welcome volatility but not investors.
There are reasons why back down to 2% in a sustained manner is unlikely to happen. Please leave me a comment, I hope to exchanges ideas with you.
E-mini Nasdaq Futures and Options:
Minimum fluctuation
0.25 index points = $5.00
Code: NQ
Micro E-mini Nasdaq and Options:
Minimum fluctuation
0.25 index points = $0.50
Code: MNQ
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
The term passive investing was first made famous by Warren Buffet, who once said, 'If I like a stock, I will hold it forever.' However, in recent years, he has been seen cutting losses on his wrong decisions and taking profits when he finds the time is right. The dynamic of the markets have changed, and he has adapted to them.
Technical Reasons -
From the chart, it's clear that the days of passive investing are behind us. We can refer to the Dow Jones or S&P Index; they provide similar readings as Nasdaq, although Nasdaq has a shorter history.
Since the beginning of 2022, the great volatility started with a year of bearishness. In my opinion, this could be a start of a long-term bear. What we are seeing in 2023 rally, possibly a bear retracement.
Let’s support my analysis with the fundamental factors.
3 Fundamental Reasons –
• Why did the decades of long-term growth, forming a linear bull market, come to an end at the beginning of 2022?
This is because it marks the beginning of long-term inflationary pressure that we all have to contend with. To counter inflation, one of the most effective measures is to raise interest rates. As we all know, higher interest rates bring challenges to businesses and stock markets.
Please take note of the timing. Inflation first exceeded 2% in April 2021, and since then, it has been on an upward trend, something unprecedented in the last 40 years. However, the Federal Reserve only began raising interest rates in March 2022, while the markets peaked at the beginning of 2022.
Consumer Price Index
Feb 21 1.68%
Mar 21 2.66%
Apr 21 4.15%
May 21 4.94%
Jun 21 5.34%
Jul 21 5.27%
Aug 21 5.21%
Sep 21 5.39%
Oct 21 6.24%
Nov 21 6.83%
Dec 21 7.10%
Jan 22 7.53%
Feb 22 7.91%
Mar 22 8.56%
Apr 22 8.22%
May 22 8.52%
Jun 22 9.00%
• Why did the market turn bullish in 2023.
Many attribute the rally to AI, but it goes beyond that. By the end of 2022, the market was still hovering around its lowest point. However, as seen in the inflation numbers below, there was a gradual decline from 9% in June 2022 to 6.5% in December 2022, creating a divergence between this positive news and the market's performance. At that point, I was preparing for a bear rebound or retracement. Of course, the inflation number continued its decline to 3.2% in October 2023, and the rally has continued until now.
Continue Price Index
Jun 22 9.00%
Jul 22 8.50%
Aug 22 8.30%
Sep 22 8.20%
Oct 22 7.70%
Nov 22 7.10%
Dec 22 6.50%
https://www.tradingview.com/chart/NQ1!/zNH28vLR-Nasdaq-Short-term-bull-Long-term-range/
• Why have the days of passive investing come to an end?
Unless inflation can back down to 2% in a sustained manner, we should expect to see much more volatile markets in many years to come. Traders welcome volatility but not investors.
There are reasons why back down to 2% in a sustained manner is unlikely to happen. Please leave me a comment, I hope to exchanges ideas with you.
E-mini Nasdaq Futures and Options:
Minimum fluctuation
0.25 index points = $5.00
Code: NQ
Micro E-mini Nasdaq and Options:
Minimum fluctuation
0.25 index points = $0.50
Code: MNQ
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
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