Close to the Bull Trap phase of the market cycle

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neuroawesom
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Close to the Bull Trap phase of the market cycle

Post by neuroawesom » Sat Nov 03, 2018 1:50 am

Want to share a post: https://www.teamblind.com/article/Close ... e-sNzEBUKZ

I do think there are some valid points in this post:
1) The general sentiment by some experts is that market is overvalued: I am sure if someone gathers data, this is quantifiable. I found two data points - A) Buffet Indicator is signaling significantly overvalued market and buffet is hoarding cash: https://www.gurufocus.com/stock-market-valuations.php and B) Morgan Stanley predicting bear market https://www.cnbc.com/2018/10/29/morgan- ... arket.html
2) The treasury/interest rates are rapidly rising with 10y treasury approaching 3.25%.

Per 1) and 2), it is valid to expect that money will be moved from equities to savings/CDs/T-bills etc. at-least in short-term which can trigger a massive selloff snowballing into a recession.

I am thinking of converting my portfolio into Cash and put in CDs/savings and wait for correction (portfolio is still up a few percentage points).

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nisiprius
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Re: Close to the Bull Trap phase of the market cycle

Post by nisiprius » Sat Nov 03, 2018 9:46 am

What's the evidence that "[reducing] allocations in equities that are very clearly popping...increasing cash allocations...and then taking that cash and DCA'ing it back into the market (over a 6-12 month period) after or during a correction..." actually has given superior results?

And why do people often say that it is "very clear" that various stocks or asset classes are overvalued when it's not clear at all, and when such judgements are very often wrong?

Just because you can write "Bull Trap phase of the market cycle" doesn't mean that markets have a predictable cycle or that the cycle always includes a "bull trap" phase.

Finally, "I expect a market rally before or right after the election (though one may never come)"... goodness, talk is cheap. What other possibilities are there? He's predicted every possibility all at once in one sentence! I expect rain tonight or tomorrow morning though it may never come. I expect the Yellowstone Supervolcano to erupt in 2019 or 2020 though it may never do so. I expect to win the lottery this week or next, although maybe I never will.
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Re: Close to the Bull Trap phase of the market cycle

Post by oldcomputerguy » Sat Nov 03, 2018 10:05 am

You know, I have read a bit about the "business cycle" over on Fidelity, and for the life of me I can't remember ever reading anything that described the "bull trap" phase. Early, Mid, Late, and Recession phases are all discussed, but not Bull Trap. What exactly is the Bull Trap phase of the market cycle?
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: Close to the Bull Trap phase of the market cycle

Post by Broken Man 1999 » Sat Nov 03, 2018 10:16 am

DEFINITION of 'Bull Trap'. A bull trap is a false signal indicating that a declining trend in a stock or index has reversed and is heading upwards when, in fact, the security will continue to decline.

Bull Trap - investopedia.com

www.investopedia.com/terms/b/bulltrap.asp.

New term for me also.

Broken Man 1999
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Re: Close to the Bull Trap phase of the market cycle

Post by minimalistmarc » Sat Nov 03, 2018 10:21 am

Broken Man 1999 wrote:
Sat Nov 03, 2018 10:16 am
DEFINITION of 'Bull Trap'. A bull trap is a false signal indicating that a declining trend in a stock or index has reversed and is heading upwards when, in fact, the security will continue to decline.

Bull Trap - investopedia.com

www.investopedia.com/terms/b/bulltrap.asp.

New term for me also.

Broken Man 1999
The opposite is a bear trap - a false signal indicating that a rising trend in the index has reversed and is heading downwards when, infact, the index will continue to rise.

I predict that we are currently either in a bull or a bear trap, and the market will rally, or crash before or after the elections (or it might not do that).

If I am correct then I will join the legions of investing legends!

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Re: Close to the Bull Trap phase of the market cycle

Post by TIAX » Sat Nov 03, 2018 10:22 am

neuroawesom wrote:
Sat Nov 03, 2018 1:50 am
I am thinking of converting my portfolio into Cash and put in CDs/savings and wait for correction (portfolio is still up a few percentage points).
Did you previously correctly predict and sell out of stocks just prior to the 2008 bear market?

neuroawesom
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Re: Close to the Bull Trap phase of the market cycle

Post by neuroawesom » Sat Nov 03, 2018 2:44 pm

No, I started investing around 2016. My portfolio is still up. But, I have never seen a bear market so I am thinking carefully about my risk appetite (instead of converting to cash) and how I would react if portfolio went down 20-30%.

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Re: Close to the Bull Trap phase of the market cycle

Post by drk » Sat Nov 03, 2018 3:06 pm

neuroawesom wrote:
Sat Nov 03, 2018 1:50 am
Want to share a post: https://www.teamblind.com/article/Close ... e-sNzEBUKZ
I never expected to see a Blind thread posted to Bogleheads. This is TA nonsense.

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Re: Close to the Bull Trap phase of the market cycle

Post by jebmke » Sat Nov 03, 2018 3:19 pm

minimalistmarc wrote:
Sat Nov 03, 2018 10:21 am
The opposite is a bear trap - a false signal indicating that a rising trend in the index has reversed and is heading downwards when, infact, the index will continue to rise.
Then there is also the mouse trap. If you get too greedy the trap snaps and breaks you in half.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Close to the Bull Trap phase of the market cycle

Post by nisiprius » Sat Nov 03, 2018 3:35 pm

neuroawesom wrote:
Sat Nov 03, 2018 2:44 pm
No, I started investing around 2016. My portfolio is still up. But, I have never seen a bear market so I am thinking carefully about my risk appetite (instead of converting to cash) and how I would react if portfolio went down 20-30%.
When an investor told J. P. Morgan that he couldn't sleep because of worrying about the stock market, Morgan allegedly said "Sell down to the sleeping point."

If you have discovered that you didn't assess your personal risk tolerance correctly, then the rational thing to do is to reduce your stock allocation accordingly--probably not to zero!--and keep it there. Correct your course and then stay the course.

Stock investing really involves risk. I think it is form of greed to want the equity risk premium without really taking the risk, and a form of arrogance to believe that "what is risky for everyone else is not risky for me, because I can see the future, and be in for the bull markets and out during the bear markets."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Close to the Bull Trap phase of the market cycle

Post by c.coyle » Sat Nov 03, 2018 4:00 pm

neuroawesom wrote:
Sat Nov 03, 2018 1:50 am
. . . The general sentiment by some experts . . .
Think about that.
VTSAX - 40%, VTIAX - 10%, VBTLX - 50%

Broken Man 1999
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Re: Close to the Bull Trap phase of the market cycle

Post by Broken Man 1999 » Sat Nov 03, 2018 4:24 pm

neuroawesom wrote:
Sat Nov 03, 2018 2:44 pm
No, I started investing around 2016. My portfolio is still up. But, I have never seen a bear market so I am thinking carefully about my risk appetite (instead of converting to cash) and how I would react if portfolio went down 20-30%.
Now is the time to do some thinking. This small drawback is nothing in the grand scheme of things.

So you should definitely be doing some serious thinking NOW.

Good !uck!

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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Re: Close to the Bull Trap phase of the market cycle

Post by JoMoney » Sat Nov 03, 2018 4:35 pm

"I expect a market rally before or right after the election (though one may never come)"
What a great prediction...
"The market might go up before it goes down (or it may just go down)."

I'm going to predict that the market will go down before it goes up (or it may just keep going up).
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Close to the Bull Trap phase of the market cycle

Post by 2b2 » Sat Nov 03, 2018 4:40 pm

BEWARE OF THE "CLAP TRAP" !!!!!

Just when everyone starts to applaud the long running bull market..... WHAMMO!

2b2

wilson08
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Re: Close to the Bull Trap phase of the market cycle

Post by wilson08 » Sat Nov 03, 2018 4:43 pm

Bear market, bull market, bull trap phase----what does it matter when
you have an Investment Plan that has been espoused on this forum
from day one. I cannot remember who originally came up with this quote
but it is apropos to any market condition: "Never doubt in the darkness
what you believed in the light." I've been through 1987, 2001-2002, and
2007-2008 and changed nothing based on market conditions, I only make
changes based on my age.

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Re: Close to the Bull Trap phase of the market cycle

Post by wootwoot » Sat Nov 03, 2018 4:45 pm

neuroawesom wrote:
Sat Nov 03, 2018 2:44 pm
No, I started investing around 2016. My portfolio is still up. But, I have never seen a bear market so I am thinking carefully about my risk appetite (instead of converting to cash) and how I would react if portfolio went down 20-30%.
Folks, we have a winner.

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Re: Close to the Bull Trap phase of the market cycle

Post by KlangFool » Sat Nov 03, 2018 5:01 pm

neuroawesom wrote:
Sat Nov 03, 2018 1:50 am

I am thinking of converting my portfolio into Cash and put in CDs/savings and wait for correction (portfolio is still up a few percentage points).
neuroawesom,

1) There will be a bear market sometime in the future.

2) Why do you need to know when it will happen?

3) Won't it be better if you do not need to know when the bear or bull market will happen? Aka, you do not need to market time.

4) Market timing is the opposite of investing. It is gambling.

5) I invest. I do not need to know or care whether it is a bear or bull market. It will work under all circumstances. Isn't this a better strategy?

6) I would suggest that you start by reading this book.

https://www.amazon.com/gp/offer-listing ... d&qid=&sr=

KlangFool

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Re: Close to the Bull Trap phase of the market cycle

Post by KlangFool » Sat Nov 03, 2018 5:03 pm

neuroawesom wrote:
Sat Nov 03, 2018 2:44 pm
No, I started investing around 2016. My portfolio is still up. But, I have never seen a bear market so I am thinking carefully about my risk appetite (instead of converting to cash) and how I would react if portfolio went down 20-30%.
neuroawesom,

1) You won't know at all. You are just guessing how you will react. If you are 100% stock, it is a good time to change to something reasonable like 70/30 or 60/40.

2) Will you be employed when this happened? What if you lose your job at the same time?

KlangFool

stocknoob4111
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Re: Close to the Bull Trap phase of the market cycle

Post by stocknoob4111 » Sat Nov 03, 2018 7:29 pm

Market is not a sure thing... Sep 2000 - Sep 2012 a 70/30 domestic equities/bonds portfolio would have had ZERO inflation adjusted returns. That is 12 years of nothing to show for in terms of growth. Sure, I am cherry picking dates but so what... if you had invested at that top it would've taken you 12 years to get any real return on your original capital which is a depressing statistic. So yeah, it can take a ridiculous amount of time to break even in the market if we have another crap decade such as 2000-2010 which may be a distinct possibility.

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Re: Close to the Bull Trap phase of the market cycle

Post by AlohaJoe » Sat Nov 03, 2018 7:44 pm

neuroawesom wrote:
Sat Nov 03, 2018 2:44 pm
No, I started investing around 2016. My portfolio is still up. But, I have never seen a bear market
There was a bear market in 2016.

https://theirrelevantinvestor.com/2017/ ... lks-about/

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Re: Close to the Bull Trap phase of the market cycle

Post by munemaker » Sat Nov 03, 2018 8:06 pm

neuroawesom wrote:
Sat Nov 03, 2018 1:50 am
Want to share a post: https://www.teamblind.com/article/Close ... e-sNzEBUKZ

I do think there are some valid points in this post:
1) The general sentiment by some experts is that market is overvalued: I am sure if someone gathers data, this is quantifiable. I found two data points - A) Buffet Indicator is signaling significantly overvalued market and buffet is hoarding cash: https://www.gurufocus.com/stock-market-valuations.php and B) Morgan Stanley predicting bear market https://www.cnbc.com/2018/10/29/morgan- ... arket.html
2) The treasury/interest rates are rapidly rising with 10y treasury approaching 3.25%.

Per 1) and 2), it is valid to expect that money will be moved from equities to savings/CDs/T-bills etc. at-least in short-term which can trigger a massive selloff snowballing into a recession.

I am thinking of converting my portfolio into Cash and put in CDs/savings and wait for correction (portfolio is still up a few percentage points).
None of this nonsense really matters. Just invest in accordance with your IPS, don't try to time the market, stay the course and ignore the noise (and that's what it is above...NOISE.

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Re: Close to the Bull Trap phase of the market cycle

Post by Sam1 » Sat Nov 03, 2018 8:10 pm

These same “expertsl” didn’t see the last credit crunch/financial crisis coming whennit was in their face. I don’t trust them to call the next bear market.

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Re: Close to the Bull Trap phase of the market cycle

Post by jharkin » Sat Nov 03, 2018 8:19 pm

I stopped reading as soon as I saw it was from Blind.

Moving on....

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nisiprius
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Re: Close to the Bull Trap phase of the market cycle

Post by nisiprius » Sat Nov 03, 2018 8:45 pm

jharkin wrote:
Sat Nov 03, 2018 8:19 pm
I stopped reading as soon as I saw it was from Blind.

Moving on....
What is Blind? (Or Teamblind?)
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2015
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Re: Close to the Bull Trap phase of the market cycle

Post by 2015 » Sat Nov 03, 2018 9:04 pm

Oh there's all kinds of "Bull Traps", but they have nothing to do with the markets. Every link you posted is a "Bull Trap" of a different sort.

Sounds like you need to start from the ground up. Read investing books, not links. Go to the Wiki and read the books recommended there. Read the books covered by Taylor's Gems.

Stop reading garbage, which is a lot of what you'll find online. Don't read garbage mentioning valuations. Just as Orange is the New Black, valuations are the New Predictions in sheep's clothing. Again, read books.

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Re: Close to the Bull Trap phase of the market cycle

Post by drk » Sat Nov 03, 2018 9:05 pm

nisiprius wrote:
Sat Nov 03, 2018 8:45 pm
What is Blind? (Or Teamblind?)
Blind is a pseudonymous gossip app for tech workers. In order to gain access to certain forums, individuals are required to verify their employment via work email. It's generally a cesspool, filled with ranting, trolling, and braggadocio.

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Re: Close to the Bull Trap phase of the market cycle

Post by Busdrvr » Sat Nov 03, 2018 9:42 pm

Doctors have to be smart, right?

Smart people must make for smart investors, right?

Here's a couple of Docs that made it onto the pages of the Wall Street Journal.

https://www.wsj.com/articles/SB10001424 ... 2458161986

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Re: Close to the Bull Trap phase of the market cycle

Post by z3r0c00l » Sat Nov 03, 2018 10:00 pm

Hate to pile one, but the very premise of investing in stocks is that over the long run they will almost certainly be higher than they are today. If you are confident that stocks will be higher than today, by 2040, who cares how they get there? If you don't think stocks will be higher by then, by all means just use a CD ladder.

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jharkin
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Re: Close to the Bull Trap phase of the market cycle

Post by jharkin » Sun Nov 04, 2018 6:10 am

nisiprius wrote:
Sat Nov 03, 2018 8:45 pm
jharkin wrote:
Sat Nov 03, 2018 8:19 pm
I stopped reading as soon as I saw it was from Blind.

Moving on....
What is Blind? (Or Teamblind?)
It’s a phone app for spoiled Silicon Valley tech workers to “anonymously” compare salaries and complain about their employers/co workers. Look it up on the App Store on your phone and just glance through the reviews....

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Re: Close to the Bull Trap phase of the market cycle

Post by dogagility » Sun Nov 04, 2018 6:23 am

z3r0c00l wrote:
Sat Nov 03, 2018 10:00 pm
Hate to pile one, but the very premise of investing in stocks is that over the long run they will almost certainly be higher than they are today. If you are confident that stocks will be higher than today, by 2040, who cares how they get there?
With >10 year time horizon, I agree it really is that simple.
Taking "risk" since 1995.

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Re: Close to the Bull Trap phase of the market cycle

Post by Ron Scott » Sun Nov 04, 2018 6:26 am

neuroawesom wrote:
Sat Nov 03, 2018 1:50 am
I am thinking of converting my portfolio into Cash and put in CDs/savings and wait for correction.
Well, you just missed selling and buying into a market correction in the past couple weeks. How are you going to do better next time?
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

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Re: Close to the Bull Trap phase of the market cycle

Post by RobLyons » Sun Nov 04, 2018 6:42 am

I agree with KlangFool as far as consider adjusting to a 70/30 or the like. Even with a long investment time line ahead, the timing seems to be right for me personally, based on numbers indicators, to evaluate my current portfolio.


As far as going straight cash, well thats a guaranteed 0% return so I personally wouldn't unless I'm paying debt, need a larger emergency fund, have a large purchase to make, or just want to feel warm and cozy at night.
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Re: Close to the Bull Trap phase of the market cycle

Post by Olemiss540 » Sun Nov 04, 2018 8:39 am

stocknoob4111 wrote:
Sat Nov 03, 2018 7:29 pm
Market is not a sure thing... Sep 2000 - Sep 2012 a 70/30 domestic equities/bonds portfolio would have had ZERO inflation adjusted returns. That is 12 years of nothing to show for in terms of growth. Sure, I am cherry picking dates but so what... if you had invested at that top it would've taken you 12 years to get any real return on your original capital which is a depressing statistic. So yeah, it can take a ridiculous amount of time to break even in the market if we have another crap decade such as 2000-2010 which may be a distinct possibility.
What was your point and how does it address the OP whatsoever?

Good thing the OP is not retiring Sept 2000.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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