<s> TEAMFLY
PREDICT MARKETSWINGS WITHTECHNICAL ANALYSISMichael McDonald
John Wiley & Sons, Inc.
PREDICT MARKETSWINGS WITHTECHNICAL ANALYSIS
PREDICT MARKETSWINGS WITHTECHNICAL ANALYSISMichael McDonald
John Wiley & Sons, Inc.
Copyright © 2002 by Michael McDonald. All rights reserved.Published by John Wiley & Sons, Inc., New York.No part of this publication may be reproduced, stored in a retrieval system ortransmitted in any form or by any means, electronic, mechanical, photocopying,recording, scanning or otherwise, except as permitted under Sections 107 or 108 ofthe 1976 United States Copyright Act, without either the prior written permission ofthe Publisher, or authorization through payment of the appropriate per-copy fee tothe Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923,(978) 750-8400, fax (978) 750-4744. Requests to the Publisher for permissionshould be addressed to the Permissions Department, John Wiley & Sons, Inc.,605 Third Avenue, New York, NY 10158-0012, (212) 850-6011, fax (212) 850-6008,E-Mail: PERMREQ@WILEY.COM.This publication is designed to provide accurate and authoritative information inregard to the subject matter covered. It is sold with the understanding that thepublisher is not engaged in rendering professional services. If professional advice orother expert assistance is required, the services of a competent professional personshould be sought.This title is also available in print as B ISBN 0-471-20596-6. Some content that appears inthe printed version of this book may not be available in this electronic edition.For more information about Wiley products, visit our web site at www.Wiley.com
To my good friend and mentor,the late George O’Brien
Contents
INTRODUCTION
1
CHAPTER 1: TRADING PRICE SWINGS
10
CHAPTER 2: A NEW STOCK MARKET MODEL
27
CHAPTER 3: FAIR VALUE: THE THEORYOF STACKING THE MONEY
48
CHAPTER 4: TECHNICAL ANALYSISAND UNSTABLE MARKETS
76
CHAPTER 5: OF BABES, O’BUCS, AND CONTRARYOPINION
98
CHAPTER 6: PRICE PATTERNS, FRACTALS,AND MR. ELLIOTT
124
CHAPTER 7: TRADING RANGE MARKETS
150
CHAPTER 8: TRADING RANGE INVESTMENTSTRATEGIES
165
INDEX
205vii
TEAMFLY
Introduction
THE BEGINNINGAdults often view their lives as somehow planned beforehand. Whatoriginally seemed to be unrelated life decisions, like pieces of a jigsawpuzzle, all came together to form a coherent story. My life seems thatway to me now.My first passion was the study of mathematics and physics. From theage of 14, at every Christmas, my parents bought me advanced books onthese subjects. From these, I taught myself calculus and Einstein’s relativity theories by the age of 15. From this I learned a valuable lessonwhile relatively young: I found that if I applied myself, I could mastercomplicated subjects on my own.The first time I became curious about stock investing came while Ifollowed another passion—sports—as a teenager. Back in the early1960s, the Los Angeles Times didn’t have a separate section for business;investing and business information occupied the back pages of the sportssection. As a teenager I read the sports pages every day.Because of the newspaper’s format, it was inevitable that I wouldturn the last page on sports and come face to face with business pagescontaining nothing but numbers. Although I had no interest in investingat the time and didn’t understand what the numbers represented, I doremember thinking that some day I would have to study this. If makingmoney was simply predicting what these numbers would be, I couldlearn how to do it. It would take 10 years before I put that optimisticthought to the test.1
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INTRODUCTION
I remember the day I started my study of the stock market—August15, 1971. It was a Sunday evening and President Nixon gave his famous“wage and price controls” speech on television. I only remember himtalking about the control of prices and wages, but there was apparentlya lot more to his speech. He also shut the gold window on the redemption of U.S. dollars and started the modern currency markets as hefloated the dollar free of the fixed exchange rates determined by theBretton Woods meeting held right after WWII. This I came to understand only later.The next day, I turned on the television and saw the Dow Jones closeup over 30 points on 30 million shares—at that time the biggest point advance on the largest volume ever. Like the starting gun of a race, thatmoment kicked off an intense interest in the stock market that has continued to this day.It is debatable whether this was the best point for a young man tobegin a study of the stock market. For the next 11 years, the marketwent essentially nowhere; 2-year bull markets were followed by 1- to2-year bear markets. By 1978, stocks had become very unpopular investments. No doubt, these early years helped me formulate certain views oninvesting that I still hold today. These influential years were the reason Inever agreed with the now popular buy-and-hold investment philosophyand why I still believe that timing the market is the preferable course.How to Start?How does one start a study of the stock market? I started by spending almost every Saturday for 2 years at the Los Angeles Library digging upeverything I could find on the subject. I pored over every relevant government publication, reference book, and investment book in the stacks.A number of books started me off in the right direction. The first was theThe Stock Market Profile—How to Invest with the Primary Trend by Jacobs. This gave me my first lesson in the subject of technical analysis.The second was a book by William X. Scheinman, Why Most InvestorsAre Mostly Wrong Most of the Time, which gave me a firm grounding inthe theory of contrary opinion.I approached this study with an open mind and decided that I wouldnot go down the logical or obvious course. I was too familiar with physicstheories that, while true, were based on ideas not at all self-evident, suchas the quantum and relativity theories. I didn’t limit my thinking only toideas that seemed logical or obvious. If an idea worked—meaning that
THE BEGINNING
3
you could have predicted the direction of stock prices with it—even if itwas strange, it still came under consideration.I had already determined that I should study the overall stock market rather than focusing on individual stocks. If stock prices were predictable, that predictability would lie in determining the direction of thewhole market rather than that of individual stocks. This decision set meoff on the path of studying how to predict the whole stock market ratherthan individual stocks.The first project was to discover whether economic informationabout the state of the economy or various parts of the economy could beused to forecast the stock market. The question posed was, “Is there aneconomic series, such as housing starts or unemployment, that couldhave been used over the last 40 years to predict what stock prices eventually did?” You might think that such a study would be very long and detailed, but it wasn’t. Since I was looking for something that would bereliable (that is, you could confidently invest money on it), any correlation would have to be obvious and easy to see—it wouldn’t be somethingsubtle. These initial studies were therefore very visual in nature. I took40-year charts of all the economic statistics that economists calculate andoverlaid each on top of the chart of the stock market. I was looking onlyto see if any of these measures consistently dipped or dived before stockprices dipped or dived.I was assisted in this study by economists’ preliminary work on classifying economic indicators into three broad time categories. In a business cycle, not everything happens at the same time; some economicmeasures come alive early, while others lag behind. Based on this concept, economists classified economic measures using their time sequencing. Indicators are classified as leading, coincidental, or laggingindicators. Coincidental indicators measure how the economy is doingright now. The gross national product (GNP) is the best-known exampleof a coincidental economic indicator.Leading economic indicators are ones that tend to move ahead of theGNP and the other coincidental indicators. They tend to forecast whatthe economy is about to become. Economists have found 12 of theseleading measures. Housing starts are one; orders for durable goods(heavy machinery) are another. History shows that an increase in thesemeasures tends to foreshadow a better GNP.One of the 12 leading indicators turned out to be the S&P 500 stockindex. Economists had determined, after poring over a hundred years ofdata, that stock prices tended to predict the future condition of the econ-
4
INTRODUCTION
omy. This is important since it should allow us to eliminate all economicdata that is classified as coincidental or lagging in the quest to predictstock prices.Theoretically, this left 11 leading indicators that might be useful topredict stock prices. Although the 12 leading indicators were all in thesame time category, maybe one of the 12 was slightly more leading andso might signal, just marginally, the direction of stock prices. If so, onemight be able to use this economic indicator to consistently predict whatthe market was about to do. So I took 40 years of data and overlaid eachof the 11 leading indicators on top of the chart for stock prices. I discovered that, except for these two others, the stock market seemed to be oneof the most leading of the 12 indicators.In summary, I could only find three economic time series that wereuseful at times for forecasting stock prices: housing starts, money supply,and short-term interest rates, with the best correlation being with interest rates. The first two were leading economic indicators, but interestrates, oddly enough, were a lagging indicator, therefore presenting amajor paradox. The act of using interest rates to predict stock prices isthe illogical act of using a lagging indicator to forecast a leading one.However illogical this was, the charts didn’t lie—the correlation wasthere. Resolving this paradox became an important milestone.Earnings Didn’t Seem to WorkDuring this time I also performed an interesting test regarding the use ofearnings to predict stock prices. I did it in front of a small audience ofaround 10 people. First I showed them a graph of the earnings of theS&P 500 over a random 40-year period, without identifying the time period. I then asked these people to indicate where they would want to buythe S&P 500 and where they would want to sell it, using only this foreknowledge of earnings. After studying the earnings chart, the group finally agreed on where they would buy and sell. Then I brought out thechart of the S&P 500 and overlaid it against the earnings chart and theirdecisions.The result was eye-opening. There were times when the foreknowledge of the earnings caused them to buy near a major price low and sellnear a major price high, which was good, but just as often it didn’t. Therewas one 5-year period of tremendous earnings growth, where stockprices actually declined, and their timing of the S&P 500 purchase wascompletely wrong. From this, I came to the conclusion that timing the
THE BEGINNING
5
market based on earnings data was very difficult at best. There were toomany times when stock prices would move for years opposite to what theearnings seemed to indicate they should. That is too long a period to bewrong with one’s investments; at least it is for me.I am not of the temperament to hold a bearish position, then watchprices rise 20% for 3 months. Unless an indicator (technical or fundamental) correlates closely with market tops and bottoms, I don’t find ituseful. How close is close? It has to be pretty close; in other words, if aviewpoint about the market is correct, within a short time frame, youmust see prices actually move in the direction of that viewpoint. Whenthey don’t, then the viewpoint must be doubted. You must apply thisguideline, however, with a tremendous amount of wisdom. In fact, knowing exactly how long to hold a bullish or bearish view that goes againstwhat stock prices are doing is the true art and skill of investing.This simple study, showing very loose correlation between corporate earnings and the direction of the stock market, disabused me of anyidea that forecasting earnings could help me make correct decisionsabout the direction of stock prices. However, this idea is widely believed by the vast majority of investors and analysts. Therefore, I wantto be very careful in explaining what I mean because from another perspective it is possible to see that earnings do determine stock prices—atleast over the long term.All you have to do is take any long-term Securities Research chartbook and look for all the companies whose prices have been in growthpatterns longer than 10 years. You will find in every case that these stocksalso have long-term growth patterns for their earnings. There is no doubtthat earnings do matter, but on closer inspection the same long-termcharts also show periods lasting 6 to 9 months where prices went opposite to this long-term trend, and sometimes these countermoves were severe percentagewise.Although earnings do matter over the very long term, they are not agood tool for trying to predict the tops or bottoms of major market moves.Technical Analysis Did Seem to WorkAs I said earlier, I could only find three economic-type indicators that,when overlaid on stock prices, would have allowed a person, at times, topredict the beginning of significant market ups and downs. Certain technical indicators, however, provided a much better correlation to thesemovements.
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INTRODUCTION
Technical analysis often incites a certain type of criticism. The criticism is usually based on the idea that stock prices must reflect some realeconomic value, and since technical analysis measures data that are noteconomic, it can’t be measuring the really important information. For example, how can a shrinking number of stocks making new highs signal animminent market decline? What does that have to do with earnings orthe economic picture? Don’t markets advance or decline for economicreasons?It never bothered me that an indicator had nothing to do with economics. As long as it correlated with tops or bottoms is all that matters.For example, I found, after detailed tests, that the very best indicator ofmajor market tops or bottoms comes from data that measure investor expectation. In my experience, extremes in investor sentiment correlatewith major market tops and bottoms better than any other measure. Thisfact eventually forces any student of the market to elevate the theory ofcontrary opinion to the highest order and then confront and resolve anyinconsistencies this creates.
THE MARKET THAT LIES AHEADThis book is a summary of the knowledge I’ve gained over the past 30years, applied to the stock market in 2002. In 1972, I promised myself thatI would write a book the next time the market showed the classic signs ofa major top. I had read that all great bull markets always end with thepublic speculating wildly in the stock market after a long bull run, withtalk of much higher prices to come. That promise was realized with thepublication of my first book, A Strategic Guide to the Coming RollerCoaster Market, in July 2000. Now that the thesis of that book appears tohave materialized, it is important to focus closely on the different swingsthat will make up this new period. It is my belief that we are again entering the type of market we had in the 1970s, except that this time it will bemuch shorter (5 to 7 years), and it will occur for entirely different reasons.The reason will have to be financial in nature. You will see in Chapter 3 that two numbers go into the equations to determine stock prices:dividends (earnings) and interest rates. The equations are in the form offractions. The long trading range in the 1970s was created by the opposing action of two powerful forces: Ever-increasing earnings (primarilydue to inflation) were being neutralized in the fractions by higher interest rates. In a fraction, if you double both the numerator and denomina-
THE FOUR INVESTING PARADOXES
7
tor, you end up with the same result. These two forces were almost perfectly in balance during the 1970s, resulting in the long trading range ofthe 1970s.However, this time I think the opposite will occur: The negative effect of lower growth for earnings and dividends in the fractions will bemathematically offset by declining interest rates. Here, the numeratorand denominator will both reduce, resulting in the same value 5 yearsfrom now as we have today.
THE FOUR INVESTING PARADOXESA few strange and important paradoxes confront the investor, and thesemust ultimately be resolved before you can understand the stock marketcompletely.I will state them here, but must read the ensuing chapters to findtheir resolution. Although the paradoxes seem simple, they are not;they contain some great truths about investing. You could read a wholebook explaining the stock market but you still be confused about investing simply because these four paradoxes are not given the focus theytruly deserve. Resolving them is fundamental to any basic investmentunderstanding.Paradox 1: I’m Happy When I’m Sad.In September 1997, the government announced good economic news:Payroll levels were increasing. The market fell 100 points. The press wasin a quandary to explain it. Analysts said that good news often means thatthe Federal Reserve will raise rates, and this is not good. If this is true,however, then carried to its extreme, the better the economy gets, themore the market should sell off. When is good news really bad and badnews really good?Paradox 2: How Can the Tail Wag the Dog?The stock market is one of 12 leading economic indicators, probably thebest of the 12. To predict the stock market, people usually turn to interest rates. Here is the paradox: The U.S. government classifies interestrates as a lagging economic indicator. It is one of the last things to movein a business cycle. Why do people use a lagging economic indicator to
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INTRODUCTION
determine what a leading indicator is about to do? How can the tail wagthe dog?Paradox 3: The Technician Says Up and the FundamentalistSays Down, yet Both Are Right.Trying to determine the direction of stock prices, the fundamental analyst looks at the economic situation, proclaims that all is well, and saysthat stocks will advance. The technician, after studying new highs andlows, the advance-decline line, and price patterns, says that the stockmarket will decline. Both are right. How can this be?Paradox 4: One Million Investors Are Usually Wrong.In the stock market, when everyone says the market will advance, it generally starts to decline. When everyone thinks the market is in or startinginto a bear market, it is usually after the fact, and the market is now readyto rise. What is the true reason that the market behaves in such a contradictory fashion, and what does it mean?
1Trading Price Swings
A NEW MARKET PARADIGMAt a series of client seminars in February 2000, I made the followingstatement.As we begin the millennium, this 18-year bull market shows all thetechnical, fundamental, and speculative signs of completion. I am notsaying that we are entering a bear market, which when ended, will thenallow the resumption of the current bull market. I am saying that wehave been in the topping process that will lead into a larger-scale correction. I do not believe we are facing a market crash. I think we’re facing a time correction, an extended sideways up-and-down movementthat encompasses a number of bull and bear markets.
My thesis was that the 18-year bull market, which began in 1982, withthe Dow Jones industrials just under 800, was displaying the classic signsof a major market top. You would think that the classic signs of a majorprice top are certain economic conditions, but they aren’t. The classicsigns are (and have always been):• Extreme overspeculation and interest in stock investing by thepublic (higher this time than during previous major market tops)• Very high levels of bullish sentiment, comparable to previousmajor tops in many indicators9
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TRADING PRICE SWINGS
• Large technical divergences in the major market indices (a factthat was being rationalized away by many market technicians whowanted to remain bullish)• Broad talk of a new era, in which the old rules about stock valuesno longer apply
TE
AMFLY
In forecasting the end of the 18-year bull market, the problem wasn’t somuch seeing these classic signs or even deciding they were of sufficientvolume to imply a major top. The key was truly believing that thesesigns were more important than the economic reasons being offered forwhy prices would go much higher. Once this was accepted, the real difficulty was trying to predict the time, magnitude, and form of the ensuing correction.I believe a large percentage of investors were expecting some sort ofcorrection, but I think the common belief was that, once the correctionwas over, the old bull market would resume. I disagreed with that. Bullmarkets that reach a level of speculative excess like this one are not normally corrected with one declining wave. Therefore, a lengthy tradingrange market seemed the most probable and was the one postulated.Now that the first declining wave of the correction is no longer just anidea, we are in a much better position to forecast the possible structureand form the complete correction will take.A Trading Range Market
The ending of a long bull market always brings new experiences foryounger investors. Younger investors couldn’t remember a time whenstock prices didn’t go up. During long bull markets, investing becomestoo easy—you put your money in, do nothing, and the market takes careof everything. Investors come to think that these spectacular and easygains are normal and forget that other types of stock markets ever existed. However, the last 20 years have been abnormal times, and it is amistake to think they are normal. A famous quote from market lorewarns against this mindset of high-level normalcy: “Never mistake brainsfor a bull market.”It is also a mistake to think that all booms will be followed by busts,that periods of extreme overspeculation are always followed by crashes.More often than not, the excess valuations driven into prices by a euphoric public are slowly dissipated by prices going up and down, makinglittle forward progress for some time.
A NEW MARKET PARADIGM
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Stock prices don’t go straight up or straight down; they move in jerksand starts. For example, a price advance lasting 4 weeks may gostrong for 3 days and then hold for 5 days before moving higheragain. These brief holding periods act like mini-corrections, effectively slowing the advance to a more normal rate.The same can happen on a much larger scale, forming what iscalled a trading range. A trading range market is a period in whichstock prices go up and down repeatedly, essentially moving sideways. Prices stay within a price band, with the trading range definedby the highs and lows.
Investors must be reminded that there have been many times in thepast when prices didn’t go up but trended in long sideways tradingranges. In fact, three major trading range markets have occurred in thepast hundred years. During these times, the natural return from stocksfalls off dramatically. The first long trading range was the 15 years between 1906 and 1920. The Dow started 1906 at a price of 75 and, aftergoing back and forth in a number of bull and bear markets, finished theyear 1920 at a price of 64. Then there was the 12-year period between1937 and 1949, when the Dow was at 195 in March 1937, ending at aprice of 160 by June 1949.The most recent trading range period was the 16 years between 1966and 1982. In 1966, the Dow first hit the 1,000 mark. During the following 16 years, it traded between 700 and 1,000 a number of times, making little progress. It wasn’t until late 1982 that it finally broke through1,000 for good. Figure 1.1 shows this most recent period using the Standard & Poor (S&P) 500 index. During these periods, trading marketswings again become a popular investment strategy.Market Timing versus Buy and HoldIt may seem strange to hear that trading market swings was ever an accepted investment strategy. After all, who hasn’t heard that investorsshould not try to time the market or the advice, “It isn’t timing the market that’s important but time in the market”? The buy-and-hold investment philosophy is very well entrenched. Its success over the last 10years of continuously rising prices is unquestioned. However, this philosophy has been espoused primarily by the mutual fund industry, which
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TRADING PRICE SWINGS
FIGURE 1.1 This chart, published in July 2000 before the market decline, showsmy expectation of the start of a new trading range market. The straight line atthe bottom shows the stock market’s trendline since 1928. Notice how the1982–2000 bull market took prices far away from this trendline. It is normal toexpect a trading range that works prices back closer to the line.
wants your money to stay put. The other philosophy—market timing—has been popular during periods when market conditions required it. Letme clarify these two competing theories on how investors should approach stock market investing: buy and hold and market timing.Buy and hold is the philosophy that you should buy a large basket ofgood stocks and hold them over long periods, ignoring the interveningprice swings. Investors who practice buy and hold believe that predictingprice movements is either too difficult or too costly. They recognize thatstock price increases through all the bull and bear markets, including theGreat Crash of 1929 to 1932, have averaged more than 10% per year.Therefore, if you just hold onto your investments and ignore the wiggles,you will emerge just fine.Market timing, on the other hand, is the philosophy that you will dobetter if you try to catch the upswings and sell just before the major downswings. Investors who practice market timing think that it can be done in anadvantageous and profitable way. They believe that strategies that attemptto time the market are more natural than buy and hold and that such strategies follow the normal tendencies of investors to avoid losing principal.
A NEW MARKET PARADIGM
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Which investment philosophy is better? This question is really answered by determining the type of market one is in. I don’t think thereis any doubt that, in long bull markets, the buy-and-hold philosophy doesbest. Like many others, I’ve seen that almost any effort to time pricemovements during a long bull market generally worsens the investmentreturn, sometimes considerably.Over long trading range markets, however, buy and hold does notwork well. Almost any well-thought-out trading strategy does better thanthe simple buy and hold. The question of which is the better strategy becomes the question of determining what type of stock market one expects to have in the near future.Since I believe that we have entered a trading range market, I thinkthat investors are going to be very disappointed with the investment results they get from the buy-and-hold strategy. Investors will have to learnto trade the swings of the market, just like their forebears did duringother trading range periods. To be successful, they will have to gain a lotmore investment knowledge and skill—much more than the do-nothingapproach required of the buy-and-hold method.Isn’t Everyone Really a Market Timer?I claim that even investors who have been invested for a long time are infact market timers. There is always a day when they buy stocks and a daywhen they sell them. It seems that most people consider it okay to market time as long as one is timing the long-term trend and the basis of thedecision is some fundamental value formula. But that is semantics—it isstill market timing. For example, it is considered acceptable if you decided to buy stocks in 1980, when price and earnings (PE) ratios were 10,and decided to sell them in 1999, when the PE ratios got to 35. Althoughthis is market timing, it seems to be considered acceptable market timing. The question then is, “How long do you have to hold an investmentbefore it crosses the line from market timing to buy and hold?” There isno realistic answer, so the idea of market timing is really that of degrees.The buy-and-hold philosophy says, “Don’t sell every time the newsgets bad and the market begins a severe decline.” In other words, don’treact to quick price changes. However, how do you avoid major crashesthat wipe people out or what do you do when the stock market has entered a long trading range? Investors will become very disappointed withbuy and hold as they watch their investments fall, rise, and then fall againand again. Their investment returns will come off the previous higher
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TRADING PRICE SWINGS
levels, and they’ll notice that doing nothing, which worked so well before, is no longer working. They’ll become willing to consider the ideathat it might be okay to sell their stocks after a 30% gain and be out of themarket, waiting on the sidelines for a new opportunity to present itself.During a trading range market, the price action slowly induces people tobecome market timers.Why Buy and Hold Is Hard to ApplyAlthough theoretically sound and well intentioned, the buy-and-holdstrategy is very difficult for investors to apply. Why? It is a little liketelling someone that the way to walk from Los Angeles to New York issimply to put one foot in front of the other until you arrive. You can’targue with the instructions, but can anyone really do it? The formulaomits too many important details.The basic concept behind buy and hold is the idea that when investors try to time the market, more often than not, they buy at the topand sell at the bottom. Moreover, many studies on market timing haveshown that when you factor in timing errors and commissions, investorswould be better off leaving their investments alone. I do not argueagainst these conclusions here (but I will in Chapter 8); in fact, I willagree with them. After accepting these arguments, however, I still believe market timing is preferable—even if it produces a worse result onpaper. How can I say that? With market timing, there is a better chancethat the investor will be around to earn that smaller return than if he orshe tries to buy and hold because the buy-and-hold philosophy omits afundamental factor from the equation.Buy and hold is predicated on the belief that the investor will neverhave a strong opinion about the direction of stock prices, or if the investor does have a strong opinion, will refrain from acting on it. Rightthere is the problem. More often than not the first part is true; an investor does not have a strong opinion and so is willing to wait and seewhat happens. At other times, however, the investor will develop a verystrong opinion. He or she becomes sure of what is going to happen nextand, whether right or wrong, acts on this certainty. Let me illustrate withan example of a possible conversation between and advisor an his client.CLIENT: My stocks have gone down 10% and things aren’t lookingvery good.ADVISOR:
Yes, I know, but just stay put and all will be okay.
DEVELOPING AN INVESTMENT OPINION
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Two weeks later:CLIENT: My account is now down 15%. The market fell almostevery day over the last 2 weeks. The newspeople are saying thatthe economy is going to get worse and the future looks prettybad. There isn’t any reason for stocks to go up.ADVISOR: Yes, but don’t do anything—we planned to buy and hold.One week later, with the stock market selling off severely:CLIENT:
Sell me out before I lose any more money.
ADVISOR:
I hear you, but remember we intended to buy and hold.
CLIENT: That’s what you’ve said for the last 3 weeks, and it has costme a lot of money. Now I