Stocks sucker punch investors, again

Stock investors got sucker punched in the gut. Emotions are running high as the Fed raises rates to deal with structural inflation due to Covid, war, and climate change. In our previous series, I introduced a chart indicator that might help us avoid the highs and lows of stocks, and reduce our emotions. This was called the Moving Average Convergence Divergence indicator. To eliminate some of the emotions involved, we would use monthly and weekly charts. To keep it simple, black goes above red, buy, and black goes below red, sell.

How did that work out the last 3 months?

The markets rallied in classic bear market style in Q3. Here’s the monthly chart from Stockcharts.

Nasdaq monthly chart for the last five years, courtesy of Stockcharts

If you were a paid subscriber of Stockcharts, we weren’t until today, using this indicator you would have sold in January 2022, and not bought since. You would have avoided more than a 30% decline in the Nasdaq for five minutes of work. Note the sell signal ended bull market that started after Covid. No new buy signal has been given on a monthly chart.

Here’s the weekly chart from Stockcharts.

Nasdaq weekly chart for the last five years, courtesy of Stockcharts

On the weekly chart, we had sell signals in March and August. The big one was January. You can see the noise in this chart compared to the monthly. Numerous buy and sell signals leads to lot of churn. Our goal is to invest less and enjoy more. With a sell signal on the weekly chart, and the July lows about to be taken out, now is not the time to add new money. The weekly makes it clear this was another bear market rally (fast rises followed by fast falls).

After the last crypto burnout, I sold most of our positions at a loss. Better a loss than losing all your money. How are Bitcoin and Ethereum? All the arguments saying Bitcoin and crypto would do well in high inflation and if stocks went down got blown up by reality.

Bitcoin monthly chart for the last 10 years, courtesy of Stockcharts

It’s hard to imagine a worse looking chart. Bitcoin peaked at 65000 last year and is floundering at 19000. The sell signal in crypto was given last year on the monthly. Again, no buy signals generated.

Ethereum monthly chart for the last 10 years, courtesy of Stockchart

Ethereum peaked at 4750 last year and collapsed to 1350, good for a loss of more than -70%.

What can you do to earn returns while bond, stock, and crypto markets roll over? The Series I savings bond continues to be the best bet. We wrote about that in May. Real estate rentals may perform better than the paper markets. It’s never a bad time to payoff high interest credit card debt. And, if you want to save money while doing good, the right solar panels are an excellent investment, courtesy of the Inflation Reduction Act.

Wish you well in your investing journey.

Sincerely yours,


Published by smilingdad

My story is one of tragedy and redemption. We've made many mistakes along the way regarding our money. Our goal here is to show you how to take care of your money life long, and as much as we can, help the Earth along the way. I call it sustainable personal finance and ethical capitalism. Currently, I am a part time writer for Cleantechnica and part-time licensed financial professional, along with being a full-time dad.

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