Long-time readers of my articles here on the MoneyShow.com know that I moved to cash a few weeks ago and began getting into the market on the short side two weeks ago. This week I added to my short positions using inverse ETFs, writes Mike Turner Tuesday.

As of Tuesday, October 30, the Dow (DJI) closed 432 points higher. Am I worried? Not at all. Let’s look at a little stock market history, but with a twist.

I’m sure you’ve seen the articles written by the mutual fund companies and the buy-and-hold proponents that if you miss the 10 best days of the markets, your returns slump dramatically. But here’s what they don’t tell you…

The best days in the markets are during bear markets! Here’s a look at five of the best ten days since the year 2000. These all occurred during the bear market of 2008.

If you missed the best day, a gain of 936 points which was an 11% bounce higher ten years ago, you would have also missed another 2900 point move to the downside.

If you missed the second-best day, an almost 900-point gain which was almost 11% higher, you would have also missed only 2600 points to the downside.

Here are the results. They’re easy to interpret.

chart

If you missed these “best” days while sitting in cash or shorting the market, you also missed an average loss of almost 30%.

I don’t remember reading that statistic in the mutual fund brochures.

Why does this occur? Bear markets are characterized by violent moves to both the downside and the upside. They don’t move straight down. There can be days and months of tremendous gains (for instance, the Dow closed at 8140 on Dec. 1, 2008, but ended the month at 8776). But these moves higher don’t hold until the bear market has run its course.

I wasn’t surprised to see this large move to the upside on Tuesday and there could be more.

I knew it was going to happen, just not when it would happen. But the market is in a downtrend and it won’t surprise me when we see another large down day move that jolts the “experts.”

If, on the other hand, the market has, indeed bottomed, then my stops will trigger and we’ll get ready to play the next bull market trend. This is the beauty of “market-directional” investing. The key is to let the market determine the investment strategy: bullish in bull-trending markets… bearish in bear-trending markets… and safely in cash when the market is shifting from bull-to-bear or bear-to-bull.
And what is doubly important about this strategy is these decisions are purely math-based; no guessing… no hoping… no listening to pundits and often self-delusional analysts who can’t understand why they are so often wrong.

Remember: The market is never wrong. Market-Directional investing simply invests in line with the market. It is the smart, safe and profitable way to capitalize on bull AND bear markets.

Last week, I asked you this question: Are you still in the market? Have you gone to your defensive positions?

If you’re still long in the market, what’s your exit strategy? There’s got to be some point in time that you’ve decided to protect your downside. Make the decision today or in the next few days. Don’t expose yourself to a potential 50% loss of capital.

Even if you have to miss the “best days” of the market.

I’m planning a special webinar on Wednesday evening, November 7 at 6:30 pm CT to discuss the results of the elections and what it will mean for the markets and, more importantly, your investments. Online seating is limited so I suggest you get a head start and register for the webinar now.

Just click here and we’ll save you a seat. I will show you how to grow AND protect your capital. You will learn how Market-Directional investing works and exactly how to incorporate it into your portfolio. If you have your money being managed by an investment advisor or if you are self-directed, you cannot afford to miss this session.

Don’t forget, the MoneyShow Orlando is just a few months away in February and I’ll be playing a big role in helping investors get back on track after this latest downward move. For more information, click on the link below.

The Orlando Money Show – February 7-10, 2019

If you’re interested in learning more about how I manage money using the Market-Directional Investing methodology, you can read more here.

Mike Turner: how to measure a market, in a short video.

Recorded: MoneyShow San Francisco, August 24, 2018.

Duration: 4:22.

Mike Turner: Rule 1 of Investing, his new book in a short video.

Recorded: MoneyShow San Francisco, August 24, 2018.

Duration: 3:42.