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Five Things You Need to Know: Macro Consolidation, Market Breakdowns, It's OK to Be Wrong, Roadmap to Success, Tricks of the Trade


Before you learn the tricks of the trade, learn the trade.


Editor's Note: While we congregate in Vail for Minyans in The Mountains 3, we asked each Professor to prepare some thoughts on fiscal literacy, how to listen to the market and their area of expertise.

1) Subsequent to every macro technical uptrend, a macro consolidation period or excessive sell-off has immediately followed and correlated in length of time. Consolidation periods have ranged from 13 to almost 20 years in length, not including the excessive sell-off of the Great Depression.

2) P/E valuation trends have corresponded to every technical market uptrend, consolidation period and massive downturn. Breakouts from consolidation periods or new uptrends have not resumed without first having the P/E ratio multiple drop below the "undervalued" level of 10.

Market breakdowns have all occurred after the P/E multiple breached the 22 "overvalued" level and were proceeded by breaking its upward trend.

The first market sell-off and corresponding bottom of a macro consolidation period normally constitutes the floor of the large technical channel underway.

All historic technical market channels have included numerous 30%-40% price fluctuations.

* From Tuttle Asset Management, LLC's 100-year Dow Chart Analysis

Random Thoughts

  • It's ok to be wrong – the key is to minimize the damage and refuse to "stay wrong."

  • If you don't have an effective roadmap to guide you on the way to success, don't be surprised if you end up lost on the journey.

  • Technical analysis is one important tool to help provide an edge in trading. It is not the only tool and using technicals in isolation only weakens the overall analysis.

  • Before you learn the tricks of the trade, learn the trade.

  • How is it possible that Macke is on national television fairly regularly?
No positions in stocks mentioned.

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