What is underway is a historic battle between U.S. monetary policy and the undeniable imbalances tha...
Are Stocks Poised for a Frenzy Phase?
08/28/2018 5:00 am EST
On August 22, this bull market became the longest history; while it is certainly approaching the end of the road, it could last a while longer, observes market timing experts Mary Anne and Pamela Aden, editors of The Aden Forecast.
The S&P 500 could possibly break above its resistance line. And if it does, it could be the most exciting and profitable phase. Here’s why:
Major bull markets are composed of three psychological phases. The third phase is when investors go crazy for stocks, driving prices sharply higher, and nearly every bull market ends in a third phase frenzy.
When the tech stock boom ended in 2000, everyone was in a tizzy about tech stocks. That’s all people talked about. It was the same story with real estate at the stock market peak in 2008.
That’s what tops are like... excitement, frenzy, investors don’t want to miss out, stocks are the talk of the town, and this all coincides with the end of a third phase. Currently, this is not happening... at least not yet. But with stocks still bullish, it’s telling us the frenzy is likely still to come.
The last final surge during the tech boom in the late 1990s lasted about a year and tech stocks soared over 100%. This upcoming surge could be similar. Lately, investors have been pulling out of stocks, but as prices rise, this will change.
If history is any guide, investors will come pouring back in. So we’ll be watching this sentiment closely, along with the economy, which remains bullish for stocks.
We recently recommended buying Google (GOOGL), Dow Transportations (IYT), Nasdaq (QQQ), Amazon (AMZN) and Walt Disney (DIS). Now we’re also recommending Dow Industrials (DIA), Dynamic Software (PSJ), Retail (RTH) and Apple (AAPL).
In all, we now recommend raising your stock position to 30% of your total portfolio, divided among these stocks, using your dollars to buy these stocks. Keep in mind, we may not be holding these stocks for a long time. But we feel they have good profit potential for this upcoming phase.
We will put protective stops on these positions and be quick to sell if our stocks close below their stops. But until then, enjoy the ride for as long as it lasts.
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