In chapter 5 of my book, Protecting The Pig, I illustrated the three “faces,” or types of risk that almost every publicly-traded investment experiences throughout its existence. Regardless of whether it is Nvidia common stock, gold bullion, or cryptocurrency, they all behave similarly over time. Human behavior doesn’t change, and the reason I point this out is because from my experience, these types of risks will eventually manifest in every investment at one point in time or another. The key, I believe, is to identify which type of risk may be manifesting, or may be about to manifest, so investors can attempt to follow Michael Jordan’s advice: “Take a negative and turn it into a positive.”

Three years ago, the S&P 500 Index experienced a Channel Correction. This type of risk manifested when price traversed from the top side (i.e. Resistance) all the way to the bottom side (i.e. Support) of the Rising Trend Channel (refer to the chart below). The nine-month decline resulted in investment losses of approximately 25% from high to low. Many investors suffered significant losses that year…but not all. Those investors who took proactive actions to attempt to protect their wealth near the top were able to “take a negative and turn it into a positive.” They were able to purchase stocks near the low with money they had preserved near the top. In essence, those investors executed the “Buy Low, Sell High” investment strategy.

The reason I am pointing this out is that the S&P may begin repeating 2022 in the months ahead. The market behavior in late 2021 that warned of potential losses in 2022 is once again beginning to manifest. Only time will tell if the markets experience a repeat of 2022 in the months ahead, but for those who prepare they may enjoy another opportunity to “turn a negative into a positive.” 

 

STOCK MARKET – THE TREND:

Chart courtesy of StockCharts.com

 

S&P 500 – WATCHING FOR THE SUMMIT:

Chart courtesy of StockCharts.com

The S&P finished the month of January 7.2% above the BLUE LINE, compared to being 5.8% above the Blue Line at the end of December. The rising trend currently remains intact.

Jeff Link

Disclaimers:

The BLUE LINE INVESTING® (BLI) investment process was founded on over 95 years of stock market history. It seeks to identify and align investment decisions with multiyear trends. Various aspects of this process have been illustrated in my book Protecting The Pig: How Stock Market Trends Reveal the Way to Grow and Preserve Your Wealth.

The S&P 500 Index is one of the most commonly followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the U.S. economy. It is comprised of 500 large companies having common stock listed on the NYSE or NASDAQ. The volatility (beta) of the account may be greater or less than the index. It is not possible to invest directly in this index.

Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volumes. Technical analysis attempts to predict a future stock price or direction based on market trends. The assumption is that the market follows discernible patterns and if these patterns can be identified then a prediction can be made. The risk is that markets may not always follow patterns. There are certain limitations to technical analysis research, such as the calculation results being impacted by changes in security price during periods of market volatility. Technical analysis is one of many indicators that may be used to analyze market data for investing purposes and should not be considered a guaranteed prediction of market activity. The opinions expressed are those of BLI. The opinions referenced are as of the date of publication and are subject to change without notice. BLI reserves the right to modify its current investment strategies based on changing market dynamics or client needs.

Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The information contained herein should not be considered a recommendation to purchase or sell any particular security. Forward-looking statements cannot be guaranteed.

Guardian Wealth Advisors, LLC (“GWA”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about GWA’s investment advisory services can be found in its Form CRS or Form ADV Part 2, which is available upon request.

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