What a year, man!
Between Brexit and Trump, I think the backward-looking theme of 2016 should be: “Expect the unexpected.”
It was mildly amusing to watch the media be so sure this, or that, “couldn’t possibly happen”… only to see it happen.
But I’m actually used to that by now.
Surviving traders learnrn to expect the unexpected. We learnrn to stay flexible and adjust the sails when markets shift – even if the shift is clearly irrational, in our opinion.
In such an instance, I always go back to one of my favorite Mark Twain quotes:
“When we remember we are all mad, the mysteries disappear and life stands explained.”
But, it’s not enough to say 2016 was “interesting” (a throw-away phrase). Instead, let’s really dig to see what sectors we were able to make money in, and how, during one of the strangest years in my career…
It Began With the 6th Worst January Ever
In late December, 2015, I wrote about the so-called “Santa Claus Rally,” the “First Five Days” study, and the “January Barometer” – all of which are statistical tools for forecasting stock returnrns over the calendar year.
By the end of January, all three indicators painted a bleak picture…
A much lower likelihood of positive returnrns in 2016. And if any returnrns could be mustered, there was a good chance they’d be well below average.
The January rout – which was the sixth worst on record – took a major bite out of investor confidence, which had already been growing wary after the sideways chop of 2015. Everyone and their brother was running for the hills.
I tried to convey that the data was troublesome… and caution warranted… but, also, that the data did not guarantee an awful 2016. And that no matter what, I would continue finding opportunities to profit from short-term trends based on my data-driven indicators and strategies.
In late January, I wrote to you about one of those indicators – what I call the “kickstarter” signal, for its propensity to “kick start” strong, bullish rallies.
As I explained, the kickstarter signal occurs when six or more stocks move up in a day, relative to every one stock that goes down. The lopsidedly bullish day typically forecasts above-average returnrns over the next several months.
Sure enough, that stock rally materialized shortly after. The S&P 500 rose 8% between February and the end of April… and small-cap stocks were up even more, at 12%.
Following the bloodbath in January, the rally caught most investors by surprise. But my Cycle 9 Alert subscribers boldly took advantage of a number of bullish opportunities during the first half of the year.
In fact, we made out like bandits, making…
- 62% and 111% on the utilities sector, between January and March.
- 114% and 336% on a silver miner’s stock, between February and April.
- 106% on an industrial manufacturer, between March and June.
Clearly, following my systems-based investment strategy – and not our fearful intuition – was our key to big profits early in the year, when most were still in duck-and-cover mode.
By May, I talked about my take on the summer “soft spot” in stocks – the seasonally weak period between May and October. But much like my January warnrnings, I never once advised getting out of the market… only to proceed defensively.
My Cycle 9 Alert strategy got subscribers into two defensive, consumer staples sector plays during the summer, making…
- 25% and 56% on an energy-drink company.
- 50% and 80% on a home-improvement retailer, (both) between May and July.
The summer was actually fairly quiet, with everyone holding their breath for the Brexit vote. That late-June event set off a two-day sell-off, which was about 100 days shorter than everyone expected during the immediate aftermath of the UK’s shocking (and “foolish,” we said) decision to leave the European Union.
Stocks raced higher in July, triggering a market-beating rally in a notoriously “risk-on” sector: semiconductors.
My Cycle 9 Alert algorithm picked up on the sector’s momentum and I recommended trades on three semiconductor stocks. We made out quite well on two of them, making 74% and 106% on one… and 93% and 116% on the other.
And Then There Was Trump
2016 is ending, of course, with all eyes, ears and fingers (some with thumbs up… and some middle fingers at attention) on President-Elect Donald Trump.
All politics aside, Trump was a long shot, but now that he’s won, everyone is trying to figure out what that means (including Trump himself, many suspect).
What does the market think?
“WOOOOO HOOOOO!” stocks say.
I, on the other hand, am remaining more cautious, because personally, I still don’t know what to think. But, that’s OK.
Remember, I’m a surviving trader. I’m a quant. I’m a data-driven investment strategist. The market doesn’t care what I think. My opinion doesn’t matter.
All That Matters Is…
We have a time-tested systematic investment strategy – Cycle 9 Alert!
Realize, investors are not the fully rational machines that economic theory suggests… we’ve always displayed at least a thread of irrationality, and always will.
Similarly, financial markets are unpredictable… always have been, always will be.
But our strategy fully accounts for the uncertainty and irrationality inherent in markets. In fact, our strategy works to capitalize on that very uncertainty and irrationality.
The same goes for the fully systematic investment strategy that I’m currently sharing with a small group of beta-testers, through my latest endeavor, Project V, which we’re preparing to offer to a wider audience in the first quarter of 2017.
When I look back on 2016, I honestly don’t know how investors survived without a proven, data-driven investment strategy. I suspect everyone who tried to shoot from the hip this year is now nursing the proverbial bullet in their foot.
Could the same happen in 2017?
It can’t possibly be any weirder than 2016, right?
I wouldn’t bank on it…
I think the wild ride is just getting started. And I’m ready for it!
Editor, Cycle 9 Alert
P.S. There’s only one day left before access to the Network closes, and I’ve heard that we may not open up spots for new members at all in 2017. So, if you want to own everything that Dent publishes… every service, book, webinar, and report, for life… you’ve got to sign up now, before time runs out!