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Too many predicting bear market

Sell!Everybody is going bearish these days and our economy and politicians are not helping much. Retails saw three consecutive months of slowing sales and tomorrows data will probably help sinking this market lower. Trump fired another of his advisers (as I read on Investing.com: making this Presidency a joke) and futures sold off.

However, among all this weakness, the market overall still holds 50 day MA and it still is on its path higher. But practice caution as all this may change quickly (as quickly as tomorrow).
 

Even with all the weakness and selling we made great income today. Most of the time I rolled put spreads away and lower and kept selling call spreads. I still must exclaim: I love this volatility as it brings a lot of opportunity to make money. The catch is, many of the trades are still open and all premiums we collected so far can evaporate if we will not manage those open trades properly.
 

More and more stocks are becoming cheaper these days and as more selling hits the market more good quality stocks will be cheaper to buy. I stick to dividend growth investing strategy, use 50% of the options trading proceeds to buy dividend aristocrats. I am happy to see this weakness in the market as I can now buy stocks such as Boeing (BA) which is shown as undervalued. Check our list of stocks our system indicates as a good buy.
 

If you go and browse media news these days everybody is predicting bear market coming like NOW. These are the headlines which caught my eye recently:
 

  • It’s Time for a Bear Market Checklist
  •  

  • ‘Dow Theory’ Warning Signal Spells Trouble for These 5 Stocks
  •  

  • ‘I hope you’re sitting down before I show you this next chart,’ says trader
  •  

  • Can Wall Street Turn in a Positive Day?
  •  

  • Gundlach predicts a 3% yield on the 10-year Treasury will spell the end of the bull market

 

And the list can go on.

But you know the old adage? Right? The crowd is usually wrong and if too many expect bear market (or bull market) it never happens at the moment of of high expectations. To see a reversal, we need to see exhaustion first. And it didn’t happen yet. On the contrary, we just saw a healthy correction and we are recovering from that correction.

Recoveries from the corrections are usually bumpy and very rarely (and when I reviewed the historical behavior of the markets how the market did after 10%+ correction in the past, I couldn’t find more than one occurrence) they spark reversal. In all instances I could see, the market recovers, mostly creates new all time highs, and then reverses (should the economic data spark a reversal).

Although, I am expecting the end of this bull too, I do not think it is going to happen anytime soon. I still believe, we have up to 2 years of the bull market left. We may see another correction by the end of 2018 and possibly see signs of exhaustion in 2019 (either early of the year or during the year).
 

However, expect 2018 year to be very choppy. It also should be a “waiting patiently” year.

 

 · Trading activity today

 

A summary of opening and closing trades.
(balance + $3297.00)
 

Today, we were rolling our put trades (mostly SPX put spreads) and adding call spreads as a hedge. Keeping the cash flow positive for the case we will not be able to roll and manage open put spreads in the (near) future and in case we would have to close and take a loss.

S&P bear market
S&P bear market

 

 · Dividend stocks to buy

 

Out of our watch list of 36 dividend stocks the following ones are a good buy at today’s prices (03/14/2018):
 

AGNC
AWK
BA
CVX
HD
KMB
OXY
PG
XOM
 

What are your expectations of this stock market? How are you preparing yourself for a potential bear market?
 





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