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BUY AND HOLD AND WEEP

By Daryl Guppy
If you didnt already guess it, then you know that long term investing is dead. Its so dead
that it actually stinks. The idea should be consigned to the dustbin of history and replaced with
more up to date thinking. Its part of the core belief that influences the way we look at market
outlooks over the next six months.
You want proof? Take a look at the S&P monthly chart. We are routinely told by
investment advisors that we should invest for the long term. Well, lets put them to task at take a
15 year time frame.
Forget individual stock picking because thats a waste of time. Evidence ? Where are
Enron, World Com, and other giants of the blue ribbon investment world? Delisted and busted.
The reality is you cannot tell who or who will not survive so we can only use the index for this
exercise.

The investors who entered at point 1 in 1998 has made a 31% return over 15 years.
Thats about 2% per year!!! The investor who entered at point 2 has made essentially a ZERO
return over 13 years. During that time he has twice suffered a 48% drawdown. The investors
who entered at point 3 has in theory made a 93% return over 12 years but he has watched his
capital go from a 93% return and then drop to below zero in 2009. This is still an average of
7.75% per year.
The message is clear. The money comes from trading the rally up trends. Its also made
trading short on the retreats. You do not have to buy exact tops and bottoms to make a better
return. Returns on capital from investing do not come from buy and hold.
After years there may be an opportunity to profit from buy and hold with the S&P - but
only if you can break a 15 year habit and sell to lock in a profit. The breakout above 1550 is
bullish because its a move above a triple top pattern. We expect to see some pullbacks
perhaps in the order of 20%. This develops a consolidation around the 1550 resistance level.
We expect to see the S&P close higher at the end of 2013. This is a bullish trend, but it contains
the potential to retreat towards 1400 before the next longer term trend rebound develops.

This 20% retreat is validated with the NASDAQ. (Dont even think about the buy and
hold approach in this market. Its still well below the March 2000 peaks near 4800. ) The
NASDAQ is in a steady uptrend. It has reacted away from the first resistance level and this is
expected. It can slip back to 3100 and remain in the longer term uptrend. The upside targets are
near 4100. This is a better trending environment than the S&P

INDICATOR REVISION
TRADING BANDS
The walls of a trading band are defined by a set move above and below the median
price. These walls are parallel to the median price which is usually calculated on a 10 day
simple moving average. Trading bands provide trading opportunities based on the consistent
price movement between the walls of the band. Trading bands provide an idea of under and
overvalued prices.