Finally we saw some green in last couple of weeks, but it's too soon to be complacent.
This relief rally in our tech stocks, can fade away because of any major news about war. Keep some cash and never go all in or use margin.
In the bear market high quality growth stocks goes to their rightful owners, traders and short term thinkers will leave the ship because their trading decisions are just based on price movement. They mostly don't know why they bought the stock at first place.
Short sighted investors mindset
Stock going up - company is great
Stock going down - company is doomed and will bankrupt
Long term investors mindset -
Stock going up - Keep calm and study business
Stock going down - Study why, buy more at attractive prices or do nothing
Keep buying your strongest and highest conviction stocks in 2022, this is exactly we are doing in Portfolio 2022.
Update from last month - where we mentioned market is going to be volatile and indicated accumulation zones.
In this update we are going to take a look back on our standard QQQ chart, at which we base our portfolio decisions.
In last few updates we indicated 20% down could be the first bottom, that eventually got hit in march. To be clear we are not here to time the bottom, but with our QQQ chart readings we can find the best bargains to accumulate more stocks in existing positions for dollar cost averaging or we can use the chart to start a new positions.
QQQ Outlook for next month:
Blue boxes shows past and current bear market. This bear market has stark similarity with what we had in 2018-2019. Back then QQQ managed to come back to 50DMA after 15% drop and then had immediate large leg down of around 10%. As you can see in the first blue box in below chart, QQQ was in total down 23% from top.
Fortunately we haven't hit 25% bottom (not yet, fingers crossed), but that can still happen.
We saw QQQ 20% down and now it came back up. Today QQQ is right at above 50 day moving average, it's a good signal that shows market sentiment may be improving, specially after Fed threw some clarity on interest rates.
This needs to hold at least for couple of weeks, otherwise we should be ready for another leg down.
Now let's take a look at volatility and % of stocks above 200 DMA
Following weekly chart shows last 10 yrs of volatility, accumulation and buying zone.
After looking at this chart it seems last two month were perfect for accumulating great stocks. As this happened only handful of times in last 10 years.
This is why i have mentioned multiple times, that 2022 is the accumulation year of great growth stocks.
In above chart:
Panel 1 shows NDX index
Panel 2 shows NDX % of stocks above 200 DMA
Panel 3 shows VIX, volatility in the market
As we can see volatility (in panel 3) came down a bit in last two weeks, and % of stocks above 200DMA is also rising (panel 2)
Please be cautious for another few weeks and keep some cash. We did some great additions in last two months in our growth stock portfolio.
If you were standing at sidelines, this is the time to start a new position, if we go down from here you can use the cash at hand to buy more with the anticipation that market is near bottom and you will hold the stock for at least for next 5 years.
Don't look for instant gratification (instant profits, right after you buy), but try to understand the long term satisfaction of building wealth gradually.