Is the Bull Market Still Going Strong?
To assess the health of the US stock market, I rely on three key indicators:
• T-bonds
• Yields or Interest Rates
• Inflation
When all three are favourable, it provides confidence that the bull market is strong, and a more passive, buy-and-hold strategy can be considered. However, if only one or none of these indicators is aligned, I would recommend avoiding a passive approach and instead taking a more proactive and vigilant stance.
Source: TradingView
The chart shows that T-bonds have broken below their long-term uptrend and are now in a downtrend. Despite recent rate cuts, lending rates remain high. A downtrend in bond prices typically signals rising interest rates, which can increase borrowing costs for companies and decrease consumer spending, both of which negatively affect the stock market. For the markets to regain its core strength, inflation must stay low for an extended period, allowing the bond and yield trends to reverse.
Since 2022, my US market investment strategy has shifted from a long-term, passive approach to a more active trading strategy due to:
• T-bonds: Unfavourable Market Insights
• Yields / Interest Rates: Unfavourable
• Inflation: Favourable
Increase Volatility Since 2022
Volatility has been rising since 2022, and investors generally dislike it. Successful investing isn’t just about capitalising on growth potential; it's also about managing downside risks. If our entry point is not from a lower base, we must be prepared for potential declines. For many, investing is passive, and they may not recognize or respond to danger. However, my approach to trading is proactive, anticipating potential market turning points.
Source: TradingView
Nasdaq Hits Our 21,000 Target
In June, when the Nasdaq was around 20,000, I set a target of 21,000 in our June’s newsletter, which was achieved in July. I’m closely monitoring this level and will adjust my strategy as needed.
Market Insights
Source: TradingView
Managing volatility
I’m not predicting an imminent downturn, but with the three key indicators not fully aligned, I expect more volatility ahead. Markets often lag behind movements in bonds and yields. For me, trading is about seizing opportunities within volatility, while mastering risk and profit management. The goal is to take smaller risks and capture more frequent, smaller profits.
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