Was 100% Of The Evidence Bullish In 2017?
Could we have found bearish charts in 2017? Yes, we can always find bearish charts, indicators, or data sets; the key is to make decisions based on the weight of the evidence. The weight of the evidence was bullish in December 23, 2016 and remained that way until the last article was posted on December 14, 2017.
How Can All This Help Us In 2018?
One of the great things about the financial markets is there are an almost infinite number of ways to attack the risk-reward dragon; our approach is one of many. Under our system, the key to 2018 will be the same as 2017:
- Wake up every day and ask are we allocated prudently based on the facts we have in hand?
- If the answer is yes, hold “as is”.
- If the answer is no, make an incremental adjustment to get the investment allocation back in line with the hard evidence.
This approach allows us to stay fully invested in stocks when the odds are favorable (see 2017); it also gives us an exit/migration strategy for the next inevitable bear market (see 1929-1932, 2000-2002, and 2007-2009).
Real World Example: Evidence-Based Model
The same approach is used to forecast and track hurricanes; an analogy described in Stocks: The Read From Probability Models. The concept of using evidence in the early stages of a bear market to migrate to a defensive posture is outlined in Are Stocks Market Trends Starting To Roll Over?.