October Jitters or Hitters
Staying the Course in a Bull Market
As the bull market celebrates its second anniversary, it's worth reflecting on the strategies that have guided us through this period. Back in October 2022, amidst market fluctuations, I penned a letter to our community emphasizing the importance of a long-term investment mindset. Here's a snippet from that letter (both the text and graphics are important):
In one week, I saw a dip of $15,000, yet, there was no panic, no urge to flee. Instead, my focus sharpened on the long-term opportunities that moments like these offer.
The Strategy That Has Withstood Time
My approach hasn't wavered since then: Invest in robust companies when their stock prices are undervalued. Ignore the noise on social platforms where doom-mongers predict endless downturns. Historical data has been my compass, revealing opportunities and risks. For instance, compare the market charts from October 11, 2022, to the recent updates from Carson Research.
Notably, I didn't aim to pinpoint the market's bottom, but I recognized the value in what I term ‘time arbitrage’—investing in temporarily distressed yet fundamentally strong companies. The S&P500 is up 62.6% in the past two years because they focus on buying good companies. A prime example is Netflix (NFLX), which I highlighted as a favored setup shortly after my initial letter (see below). Today, NFLX trades at $722.79, a significant rise from the $289 level where many would now wish they had invested.
I finished up the month of October 2022 sending out another letter emphasizing my long-term plans and what I was buying. (see below)
There were many pullbacks after October 2022 which ALWAYS brought out the critters on Twitter. They caused many people to have jitters and decided to be quitters. Many chose to go to all cash and “wait for the perfect time” to buy, which of course never comes.
Embracing October's Opportunities
As we find ourselves in October once again, the market might show its seasonal spookiness, bringing out the 'critters'—those perpetual naysayers.
However, this is not the time for jitters or to become quitters. History suggests November could be quite favorable, and these fluctuations are your chance to apply the edge we had two years ago. (SPY has 90% positive hit rate with 4% average return - see below)
Current Investment Plays
Amazon (AMZN): Among the more attractively priced of the MAG 7 stocks, offering a good entry point for those looking at long-term gains
NVIDIA (NVDA): Showing interesting patterns with nested inside candles, positioning for a potential surge back to all-time highs
Russell 2000 Index Fund ETF (IWM): Has entered a daily TTM squeeze in a nice flag pattern. Also has earnings as a tailwind over the next 2 quarters. Historically small caps outperform the first year after the beginning of a cutting cycle by the FED
Other companies like GXO, UBER, PLTR, TTD, FLEX, DHI, SHW, and CRM also fit this strategy, where even shorter-term trades are made with an eye on long-term potential.
Preparing for Pre-Election Volatility
As we approach the end of October, historical trends suggest a possible pullback, often exaggerated by pre-election anxiety.
Here's how to prepare:
Have a Master Watchlist: Ready yourself with a list of solid companies to capitalize on any market dips caused by the 'jitters'.
Understand Historical Trends: Post-Fed rate cuts, small caps, value, and growth sectors typically see the most benefit.
3. Keep the Focus on the Long-Term: Regardless of the short-term strategies you employ, always retain a portion of your successful investments. Allow these winners the opportunity to compound and deliver returns over time.
When the market noise ramps up, remember this is not just about weathering the storm but about setting sail when others are docking in fear. Embrace the October jitters as an opportunity to be a market 'hitter', not just a survivor. Keep your focus long-term, and let history be your guide in navigating the waves of market sentiment.