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Chris Rowe
Every three years, on average, the stock market does what it’s doing right now – forming a “bottom” and creating the best stock-buying opportunity you’ll likely ever enjoy.
You’ll never forget the experience of buying cheap stocks, then watching them shoot higher literally uninterrupted.
Why would stocks shoot higher off a market bottom?
When the market falls very far (into “bear market territory”) it creates a “slingshot effect.”
The further down it goes, the further back the slingshot is pulled.
When it finally “lets go,” the market tends to blast off.
And stocks don’t just move higher. They keep moving higher unopposed.
This happens thanks to something you’re familiar with – Supply and Demand.
Demand (buying) pushes stock prices up. Supply (selling) pushes prices down.
Imagine if all you had was Demand. No Supply. That can and does happen, every three years on average.
Imagine a Dolphins game with no defense on the field. Imagine Tua Tagovailoa throwing passes while no one tried to stop him!
That’s what happens at a market bottom. Buyers (Demand) are “on the field” while sellers (Supply) are in the locker room.
Why?
For the market to fall a lot, which it has lately, a tremendous amount of selling must have occurred. So much selling that stock buyers (Demand) are so exhausted they can baley lift their arms to block a pass or tackle a runner.
Imagine if sellers prove so strong, they roll over the buyers like a tsunami rolling over a town.
But…
Think about how many fund managers took a chance and bought stock lately, only to have that tsunami of sellers roll over them.
Think about them as people watching the value of their funds get smashed.
How would YOU feel if you bet on a stock that got smashed, while your job is to manage a fund that 200,000 people own?
The morale of fund managers is low or non-existent. They think, “If you can’t beat ‘em, join ‘em.” And they become sellers themselves.
But not all of them.
The market is a battlefield where some weaker fighters (buyers) retreat and fearless ones remain. They have zero fear. They don’t run (sell).
Once the battle of Supply versus Demand ends, anyone left standing is never going to run (sell).
When the market reverses back up, they will not turn into the forces of Supply. Meaning, they will NOT oppose the march of prices higher.
So when the stock market is going higher following a bottom, no sellers remain on the field. They’ve already sold, or they’re crazy/fearless and will never sell.
No sellers means no “defense” to block Tua Tagovailoa’s passes and his march downfield to where your trading account has doubled… tripled… or more.
With sellers gone, there’s no reason for prices not to soar.
That’s why stocks went straight up after 2003, 2008/9, 2012/13, 2016…
And again in 2018/19… And also after the 2020 Covid Crash.
And that’s why they’ll almost certainly go straight up this time around!
Now, the market has fallen very low, but it can fall lower. Perhaps much lower.
Let it!
Wait for the market to reverse higher. Wait for the slingshot to let go!
Thanks for reading, and I’ll see you downfield for a dance in the endzone.
For trading ideas visit TMIfree.com and sign up to receive my free newsletter.
Chris Rowe
Founder and CEO, True Market Insiders
“You see it in the price before you see it on the news.”
Founder of True Market Insiders, Chris Rowe, has been involved with some of the most dynamic companies to emerge from the financial services sector.
Working within the financial services industry since 1995, Chris held various senior positions at money management and investment banking firms where he served high-net worth and institutional investors.
Since 1996, he has been analyzing and managing investment portfolios of publicly traded equities, debt securities, derivatives, options, commodities and private securities.
Since 2003, he has been publishing financial analysis, education and editorial.
He consulted for large hedge funds identifying attractive investment opportunities, writing reports and helping them hedge positions.
He was an active underwriter of both initial public offerings and secondary/follow-on offerings, some of which acted as the investment banker placing angel investors’ money into the private placements.
Chris Rowe currently is the CIO of Rowe Wealth Management, a registered investment advisory firm. He is the non-executive chairman of True Market Insiders.
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