Transcript
Hello, everybody, welcome to Tuesday. Well, today, the S&P 500 was down about a half percent. But on the good news side, majority of our targeted indexes did better than the S&P 500. Today, including all of the pieces that we bought yesterday. So that’s really good, actually. But today was kind of slow day, I’d like to take this opportunity to show you some information about investing some knowledge that I think is important.
The more that you can learn about investing, the more confidence you have, the more confidence you have the more stock exposure, you can probably afford, at least mentally. And usually, that results in a higher rate of return over the long term. So that’s a part of what I’m trying to do in this series. So let me just share a couple of things with you. So you get some ideas of some of the basics, some of which we’ve talked about before, but sometimes it takes a while to see them. So first of all, is this concept of support and resistance. So this is the S&P 500 is represented by Vanguard’s version of that. We were in this channel, right, we broke out of this channel. Here, we broke out and came back down. But Monday and Tuesday today, we broke out and you can see we held today, we actually bounced, zoom in here for a minute, we bounced right off the top of that channel today, which is exactly what you want to see. So that’s the support that comes in.
Now if we look over here, we can see how many shares traded at each price. So there’s not a lot of support, like we have back here with lots of shares traded here, but we’ve got a lot of good support. So that’s an important component. The other thing that’s important to understand is kind of when everybody says something’s going in one direction, and it gets really extreme, it normally goes the opposite way.
So if you recall, this is mostly October, and here’s the last day of October, markets falling. Everybody thinks the election is going to create this massive downturn, all kinds of hysteria, riots, contested election, whatever might happen. And then look at November, boom, boom, boom, boom, boom, boom, really amazing month all together. So watch for that sentiment indicators, to kind of understand, you know, hey, when everybody’s on the other side, the only people left are the buyers. And they came in here, for example. So it can go the other way. Because this is one of my favorite sentiment indicators.
This is a Put Call ratio. And I actually smooth this out, this is a 10-day average. So when this gets really high like this, that means that people are probably, you know, past the point of panic. And so we ended up with a bottom here back in March. And when things get really low here, okay, that means people are getting too aggressive in their thought process. And again, we ended up with a little high here in September, if you look where we are, now it’s coming down, okay. But it’s above this red line, which is one of my, you know, lines that I drew in there. So I think sentiment is really not too bad right now at all. The other thing we watch for is volatility. So this is a VIX index. And so this shows how much volatility is in the market at any point in time. So when it gets really high, that markets coming down, but as it goes down, that’s because the market’s going up. And so if you look at where we’re at right now, volatility is dropping, and that is a good thing for the market here in the short term also.
So those are some of the basics that I think are important support, sentiment, volatility. Those are things that I watch for on a pretty regular basis to try to, you know, see what’s happening as far as that goes. And so hopefully, that helps everybody else to get to a spot where you can start to slowly understand what’s happening with these market changes. And I find the market fascinating. It’s never quite the same. But those pieces I just mentioned to you are things that I’ve been looking at for decades, really, and still, still watch. Lots of things kind of come and go, but those have stuck with me. So look forward to talking tomorrow and let’s see what’s going to happen here. It’s very interesting times.