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Sorry you didn’t win the ultimate multi million lotto just a mere $100,000. So you’re not set up for life but it will tie you over for a while.
So what to do with your new money?
This is a question I always ask myself when I want to put money into the markets. I ask myself if I won lotto would I put it into the markets right now. Would I treat it as a trade or would I treat it as a long term ‘buy and hold’? Or would I await a decent pullback.
Some Fund Managers of course because of their charter have to buy into the market as more funds come in. And because they can’t trade it – for numerous reasons – their buys by default are long term if not medium term.
When I ask the question would I buy now, I look at a bare bones line chart:
click to enlarge
And at times such as now I conclude even a Kindie Kid or man or woman from Mars would say ‘we are now massively higher than where we have been’. Even with a modicum of explanation they might conclude that, based on past behaviour, we may see a retreat before another move higher.
So maybe it is not so tough to hold back throwing your new won pocket money into the equity ring. Although some do. For all sorts of reasons too numerous to mention – but all associated with matters of the mind.
Ok so we wait.
But the trick is how deep will this retreat be, what time will it take to complete. Will it be a dip, a pullback or the resumption of a bear market downward spiral after a bear trap rally?
I have previously written in more detail on the distinction between all three and how one identifies which one it is. You can go into the TTN archives and find a number of articles on this.
But for mine I will keep my lotto winnings for a while. Patience will pay.
Enjoy the ride
Tom Scollon
Chief Analyst
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