View attachment 337787
Want to take this bear market forming in bonds to talk about the kind of chart we don't want to see in stocks and how markets can give clues about when to change strategy.
1. This point in July 2020 is the first sign to start paying more attention. The market corrects off the spring time high but then is unable to set a new high, forming a double top. This is not a panic sell everything. It's a "start paying attention" moment.
2. At this point price has fallen below the 50d (blue line) and twice is unable to get back on top of it. Now our concern is increasing, start trimming...
3. By this point concern has intensified as price has now lost the 200d (red line) and is unable to get on top of it after two rally attempts. For me this is a I'm complete out moment. Some would hold longer because the 200d is still increasing and it may just be a consolidation but I'm willing to give up the few percentage points to wait till the price action proves it by staying above. In this whole process the earlier into signals you sell the more you are going to lose alpha to fake outs, the correct answer speaks to people's individual goals and risk tolerance.
4. By this time in Dec the 200d moving average has now flattened out and is starting to decline, not at all a good sign. Maybe it's consolidation, and that's a possibility and if it is the support around $153 should hold.
5. By this marker the market gaps below the support then on a rally can't recover it. You are now in owe shit mode and should get out completely
If this ends up a real bear market for bonds nobody is going to look back and be pissed they sold at $150 if we go back down to the $115 range. Market timing doesn't work because people want to sell the very top. That is just gambling, and will constantly be wrong. Accept that some tolerance of giveback is necessary to make sure you capture most of the move. And when things turn against you, you will be out and protected from the lion share of the decline.
At some point in the future the equity market chart could morph into something like this and that is the time to really start paying attention. There are always clues if you are looking in the right places.