Bull Markets Crawl a Wall of Worry

Bull Markets Crawl a Wall of Worry

Posted on April 16, 2012

Headline: The market just experienced the biggest weekly loss of the year. Headline: Lousy jobs report sends stocks lower – April 9, 2012. Stocks end worst week of 2012 – April 13, 2012. The commentators on CNBC are always emotional and have shifted from giddy to pessimistic.

Our Portfolio Thermostat Matrix shifted from Market State 1 to Market State 2 on April 9. We remain in a Bull market.

Market State 1 means we are in a long term Bull market, volatility is low and the short term supply and demand indicators are positive (Green, Green, Green) Market State 1 = Bullish / Rational.

Market State 2 means we are in a normal short term correction within a Bull Market. (Green, Green, Red) = Market State 2 = Buy the dip.

The typical correction during Market State 2 is -4% to -7% from the previous market peak. The current decline, from the 4/02/12 peak through Friday 4/13/12, is only -3.44%.

So why all the doom and gloom? “Bull markets crawl a wall of worry.”

We investors tend to feel that we are either too late or too early. “The market is too high to buy and is ready to correct at any moment.” When the market does correct, the headlines and our gut says things could get much worse. “It’s too early to buy.”

A healthy Bull market creates a chart that looks like a saw tooth pattern. An advance followed by a consolidation or correction, then a new higher high, followed by a higher low, higher high-higher low, etc. A Bull market is always subject to a normal -4% to -7% corrections.

Canterbury Volatility Index (CVI) is 73 or 6 points above its lowest level for the current cycle at 67.

As long as our volatility index remains low, the current correction should be considered as an opportunity to “buy the dip.”

4/10/12 - Market State 2= Rational - Bullish “Buy the dip” Canterbury Volatility Index (CVI) 73 (only 6 points above its lowest level at 67)

The Canterbury Portfolio Thermostat identifies 12 different Market States. Of the 12 Market States, 6 are Bullish Market States, 4 States are Bearish, and 2 States tend to precede a transition to a Bearish Market State, meaning caution.

Please call me for a detailed description of the Portfolio Thermostat Matrix.

Canterbury Investment Management: Tom Hardin

More About Tom Hardin

As Chief Investment Officer, Tom Hardin, Chartered Market Technician (CMT), makes all the final decisions on all investment and portfolio management decisions for Canterbury Investment Management. Tom has more than 30 years experience in the investment management industry and has broad breadth of knowledge. He is known as an innovator, educator and been revolutionary in the advancements in portfolio and risk management.

Every effort was used to provide accurate data and mathematical calculations to provide, what we believe to be, accurate results. Canterbury Investment Management, LLC, and its principal owners, make no guarantee of completeness or accuracy of data or calculations as well as conclusions of any statistical data or information contained in the simulation illustrated on this page. Past results or performance is in no way a guarantee of future results.