Timing Your Bear Market Investments

Hello, friends, This is Vijay Bhambwani here. I hope you're enjoying my videos and they are helping you become better traders and you're able to decipher the nuances of the market a little better.

In this video, I want to talk to you about how markets shrug off bad news, shrug off the bearishness, and when an average Joe, an average aam aadmi or a retail trader is succumbing to panic, why the markets spring back like a jack in the box and what really makes the market do that?

A few days ago, I made a video about why the Ukraine war is a blip on the long term radar and you should not be tampering with your long term core investments in your portfolio, which you have bought with a multi-year timeframe because this even too, like the proverbial saying goes, shall pass.

Must See: These Segments are Witnessing Incredible Growth with Modi's Push

Now I want to share an anecdote with you. It's a real life anecdote, and those of you who are statistically minded can do some homework on this and actually become far better traders and investors particularly.

You see, in the 1960s, the Second World War was done and over. The soldiers who had gone to the front had come back home and they were seeking jobs and as is natural after a major war, there was a slowdown.

In wartime, everything is being produced at peak capacity because there are shortages but those capacities become unutilised and idle in peacetime. The soldiers may or may not be as qualified as they should have been because university students, semi-skilled people, all get sucked into the armed forces.

So there was a big recession in the United Kingdom, England, and the only institution that had surplus money to invest was the Church of England. No surprises there. And the Church of England wanted to time the market by investing its surplus into equities, but they did not want to run the risk of losing money on their investments.

So they put out an advertisement in the papers that the church was looking for an economist who could invest money for God and since it was Episcopal dispensation or duty to God, the Church of England would not pay any remuneration to the economist because he was doing God's work. But he would be blessed by God because he would receive obviously coverage, that he was handling the Church of England's money and maybe he could get business elsewhere.

Nobody came forward because sentiments was subdued and herd mentality ensured that pessimism said nobody would want to take that chance.

One economist by the name of Edwin Coppock, came forward and said, I am willing to do the work for God and I don't want any remuneration but since God is asking the question, I want God to provide the answers for which the Church of England should provide unhindered access to its premises to me so that I can seek the answers, which the Church of England provided.

So he started touring various churches and speaking to the priests who were in the confessional box, and he went and asked them as to what people were confessing about pain. Why was he asking about pain? Because a bear market is supposed to give you pain.

So what he aggregated as an answer from many, many churches was that the biggest pain was that of a widow who had recently lost her husband, especially if she was not financially well provided for and if she had no children, issues, especially a male issue who could look after her old age. So her insecurity and financial helplessness was extremely painful.

These widows would often come to the priest and confess that they were getting depressive thoughts. Some were getting angry. Some were basically losing their faith, etc. Now Edwin Coppock started also filling up questionnaires after interviewing these priests, and he asked them what was the average time that a widow was taking to get over her pain and come out of this depressive phase?

To his surprise and maybe not even a surprise, he found that an average widow was taking anything between 10 to 14 months to hit a bottom, as it is called and behavioural finance.

When you're extremely depressed, you feel the world is something that you don't want to fight anymore. You want to give up. It is called hitting a bottom. So the widows were hitting a rock bottom where their mental state was concerned, anything between 10 and 14 months, and then slowly but surely, they picked up the threads of their life, and they started going about business as usual on life as usual.

So Edwin Coppock's hypothesis was that the biggest pain or the biggest depression that a human being could suffer was the loss of a near and dear one, especially a husband of a widow who was not well cared or well provided for financially.

If she could move on between 10 and 14 months, a bear market should not last beyond 10 to 14 months' time frame. So those for you who traded long enough, I have been trading these markets since 1986, and let's take the example of the last big bear market. Just go back in time and see when the bull market that started in 2003, how it ended on eighth of January 2008 and how a bottom was made in late October 2008 itself.

Any prizes for guessing what the time frame was? January 2008, October 2008. 10 months, 10 months. So if there is a long term bear market, which this one was, it's between 10 to 14 months. If it's an intermediate bearish phase, it is 10 to 14 weeks. If it is a short term blip on the radar, it is 10 to 14 days.

So this is a period that you should be keeping a close eye on. As a matter of fact, the technical analysis community decided to honour Edwin Coppock by making an oscillator called the oscillator called the Coppock's curve or Coppock's oscillator.

If you Google search it, you might even get formula for Metastock and Ami broker, AFL formulas for these two softwares, and you can see how at Edwin Coppock's work, in spite of the fact that it has been more than half a century, is still helping investors to time the market, more or less, not the exact bottom, but more or less, and make better informed decisions.

So you can see that the market basically hits a rock bottom and then starts to brush aside all bad news. Remember the ISIS in 2014? Every time of video came out about a beheading by the ISIS warriors, you would see the market tank and after the first 5, 7, 8, 10 videos maybe, the market shrugged it off and he said, okay, let's go back to business and we will basically start focusing on everything else, like inflation, currency, unemployment, corporate profits, etc.

This is precisely the underlying reason human beings tend to get over their grief, dust the grief off their collar, and get back to life. Now is 10 and 14 month timeframe a line cast in stone? I don't think so.

Do remember that in the 1960s it was a pure, delivery based cash investment market. From the 1980s and 1990s, the onset of derivatives has accelerated the pace of the market. So rallies a quicker. So falls are quicker. They're much more vicious, but bottoms are also made faster.

The cycle is getting compressed. Information flows faster. You can basically send a WhatsApp message to any part of the globe within a few seconds or nanoseconds maybe. So you see market cycles are turning smaller and therefore, markets tend to fall viciously. But time wise, the directions are between 10 and 14 months, 10 and 14 weeks, and 10 and 14 days, if not shorter.

Which is why I told you that the Ukraine war is not something that you should lose your sleep over. This too, shall pass, as shall every decline in the market. Every downtown in the market too shall pass. Don't deviate from your long term investment core portfolio blueprint because this too shall pass.

On this optimistic note my friends, I bid goodbye to you not before reminding you to click like on this video if you liked what you saw. Do google search Coppock's curve or Coppock's oscillator and enrich yourself with this wonderful tool.

In the comments section, good, bad or ugly, do let me know what you think of my work and what you would want me to speak about next. Help me reach out to fellow like-minded investors and traders by referring my video to your family and friends.

I thank you for your patience and watching this video. Till we meet again in my next, this is Vijay Bhambwani bidding goodbye for now. Take care. Have a profitable day. Thank you.