E Reasons To Be Cheerful – There’s Three

No doubt, the new normal of volatility makes near-term forecasting an adventure. But then again, volatility is what keeps traders and market analysts in business. After all, if nothing moves then there is no profit – or people who want to read about it.

Remember, bitcoin was an afterthought a few years ago. Then, all of the sudden, it balloons in price and a whole industry pops up to profit from it. There’s nothing like huge sums of money changing hands to get the juices flowing.

Right now, stock market volatility not only makes things interesting but provides ample fodder for journalists. And for charting wonks like me, it lets us trot out more obscure relationships to explain things better than the other guy.

I want to look at three charts today and they are all purely technical. And they are reasons for me to say that buying stocks now, as long as you are prepared for a few big drawdowns along the way thanks to volatility, will make you happy a few short months from now.

After that, I am not so sure. We had a nice, needed cleanse but the rebound will likely cause a lot of the speculation to return, setting us up for yet another “event” and possibly a cyclical bear market.

Let’s cross that bridge later.

Oh, and as for the title of this missive, it is a play on Reasons to be Cheerful, Part 3, from the bizarre Ian Dury and the Blockheads back in 1980. Go ahead, Google-Bing those lyrics and wonder how that happened before there were Tide pods to eat.

Reason 1 – Risk Bonds Beating Risk-Free Bonds

Regardless of the general direction of interest rates, we can discern a risk attitude of bond investors using a ratio of the investment grade corporate bond ETF (LQD ) and the 20+year Treasury ETF (TLT). If investors are really fearful they will look for the default-risk free characteristics of the TLT. The ratio will fall in a flight to quality.

But guess what? It is not falling. It actually just broke out to the upside from a flag-like pattern.

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Disclosure: No positions in anything covered.

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Surae Magruf 9 months ago Member's comment

The recent roller coaster of #cryptocurrency attests to your comments about the volatility of the market. #Bitcoin just rose more than $2k in over a day.

Susan Miller 9 months ago Member's comment

But didn't #bitcoin fall by roughly the same amount the day before?

Beating Buffett 9 months ago Member's comment

I could use some good news today.

Currency Trader 9 months ago Member's comment

You are right about #bitcoin. What's your take on it, and #cryptocurrency in general?

Michael Kahn 9 months ago Author's comment

I now call them craptocurrencies. Just a ridiculous exercise in human greed. Good concept but basically useless as a currency.