Note: This is not investment advice. Please do your due diligence before investing. Have you considered donating some of your gains to help Ukraine or strengthen democracy at home? The people of Ukraine suffer and die under an unprovoked attack. Democracy, freedom, and privacy are under stress around the world. We need to work together to secure our rights.
On May 4th, 2022, the Federal Reserve raised short term interest rates by 0.50%. This was the largest move to raise rates in 20 years. Markets were concerned a 0.75% increase would happen and rates would rise quickly to combat inflation. When it didn’t rise as much as possible, markets sighed, and a relief rally took place.
All that was wiped out yesterday, when the Dow crashed by 1300 index points, the Nasdaq was down 5%, and crypto fell, again. With sharp rallies and epic falls, it seems we have entered a bear market. Buy the dips at your peril.
Previously, we had mentioned a 5,34,8 Moving Average Convergence Divergence indicator. Let’s see how it did for the Nasdaq and Bitcoin.
Long ago, the index gave a sell signal in Nov. The index went from 16000 to 12800, a smooth move lower of 20%. The index bounced 10% from 12800 to 14200. I was looking for a test of lower prices to buy. Like many of you, I got caught in the downdraft. The index is back down to 12300. We don’t know when the bottom will be. Had we bought and sold at the two blue lines, our loss would have been minimized. We patiently wait for the next buy signal. While we wait, we avoid high prices, and buy at somewhat lower prices.
People think low prices are bad and high stock prices are good. High prices are good if you want to sell and retire. Low prices are good to get more for your money and have a long time horizon to invest. Low prices are bad if low prices become lower prices for an extended period of time.
Bitcoin reached a peak of $65000 per Bitcoin in November. It dropped as low as $36000 in January, an almost 50% loss in three months. Prices rallied, fell down, and a buy signal was given in March. Within one month a sell signal was given. We are now at the January lows. Had we bought and sold at the blue lines, we might have broken even again and saved ourselves another 5% loss. We wait. Will Bitcoin change the world? It’s not going so well in El Salvador. It is not gold. It returns no interest, unless you lend it out. It has no cashflow it may earn. Only future price appreciation and reducing supply are available.
No one knows where the present will go in uncertain times. Save your money for when opportunities are good, not when interest rates are rising, assets crashing, and inflation at multi-decade highs. As we say often, the best investment is an investment in yourself. Learn more, do more, earn more while assets are not doing well. Use your higher savings to buy assets cheap.
Thanks for reading.
With peace, hope, and love,
4 thoughts on “Stocks, crypto, everything is crashing”
The stock market was like a casino at the start of pandemic with pharma companies getting very high unrealistic valuation because they happen to be developing something or the other for Covid-19. Now with most population vaccinated and rising inflation, all these companies have lost most of their market cap. People are buying more of p/e positive companies compared to non profitable growth companies. Let’s just hope there isn’t a second recession
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One could say it’s like a casino still. Nasdaq went up and down 5% in two consecutive days last week. Dow went down 1300 points in one day. It’s not only pharma, fast growing tech raced ahead. You are right, many of the pharma companies have lost value since many people are vaccinated. Yes, value companies have been underperforming relative to growth. They are cheap, relatively speaking. The chance of a recession is increasing, dangerous experiment the Fed is undertaking.
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Hey guys, I try to time the markets, my focus is S&P 500, my model predicted final bottom here on June 30th (w tight stops below the mid June lows) and forecasting next major peak in early September! Happy Trading
Hi Schmitty, thanks for the comment. How are you determining market lows and highs? I am curious, if you can share. 1970 had a large first half decline before coming back in Q3. We might follow the same pattern here, before testing further lows.