I love a good meme as much as the next guy.
But as this story from Bloomberg confirmed this past week, retail traders who rely on fly-by-night stock pickers using memes to influence trade ideas have suffered in this turbulent market.
Friends, since their inception, financial markets have always functioned as mean-reverting price instruments.
What does that mean?
Just think of what happens to a rubber band when you stretch it then let go…it snaps back (i.e., reverts) to its relaxed (average) state.
To apply this to stocks with a visual example, I’ve chosen to use the following monthly line chart of the Dow Jones Industrial Average (DJIA) because its long price history.
What this chart shows is that, since it began trading in 1896, the DJIA has developed a central price tendency, also known as a regression line (see middle red line).
And every time the index has stretched too far above or below this central average price, it has begun the process of reverting back toward it.
Friends, markets rise and markets fall, and we just happen to be in one of those cycles where the rubber band simply stretched too far in late 2021.
With the Federal Reserve now firmly raising rates and effectively popping yet another bubble it created starting in 2008, the stock market can be turbulent for quite a while.
If you think you can navigate this market on your own, BE MY GUEST!
By no means do I think I am the answer, but you learn best by trading in tough market conditions with education from a seasoned guru.
Over the past 20+ years, I’ve been through chop like this many times!
Learning on your own is the worst way, because by the time you are through paying the tuition to the school of hard knocks it’s possible you may run out of money.
Friends, a new trading week will be here in less than 48 hours, but I’ve already got my educational lesson plan, my trading plan, and my mean reversion charting tools ready for members of my Total Alpha service.
FOR A LIMITED TIME, you can come be a part of Monday’s upcoming LIVE training session where we’ll discuss my trading ideas for the week, and you’ll also get INSTANT access to a huge archive of educational videos, our legendary options academy, and so much more for a special discounted rate that carries a 30-day money back guarantee.
I hope to see you on Monday.