So, what are you thinking about the markets now? Is the correction that we have been through still too much on your mind? Are you thinking about moving out of the markets based on some commentary by alleged experts?  Our emotions sometimes get in the way, perhaps we’re concerned about a retest of the previous lows or even worse another down leg that is worse than what we have already experienced. If you are watching the markets every day it’s easy to get caught up in the daily hype that comes from market analysts.

Perhaps it’s better to step back and take a longer-term view of the markets and not get caught up in daily gyrations of the markets. Focusing on longer-term time periods can be useful.  Watching the market on a weekly basis is sometimes better than watching the erratic actions that are found in daily charts.

Let’s take a look at some weekly charts.

Most people understand the way long-term markets work. We tend to have long periods where the bull market remains in place. These bull markets are usually driven by new technology advances. In the 40’s through the 60’s, it was all about plastics and electronics. From 1980 through 2000 it was the invention of the internet and personal computers.

The time in between, from the mid 60’s through the early 80’s, was a period of consolidation. This was a time where overvalued markets were able to settle into more reasonable valuations. This very long consolidation led to a very long and sustained bull market, rallying from 1983 through 2000. The only major blip occurring in 1987, during the monetary crisis.

I’m going to layout the framework for a continuation of this bull market. The only caveat, as I’ve mentioned before, is what the Fed has done with quantitative easing. They printed a lot of money and have controlled interest rates. This has never been done before, so we really don’t know the consequences of those actions. With that in mind let’s take a look at an index that measures all of the stocks in the stock market.

This index is not overly influenced by a few leading stocks, it gives us a view of the average stock in the stock market.

You can see that the average stock topped back in 1998, they didn’t follow the tech stocks into the tech bubble of 2000. If you look at the subsequent tops, you can see that we have been going through a long-term consolidation for almost 20 years. In 2017 we broke above these levels and the recent correction appears to be a test of that breakout.

Bubbles don’t usually occur at the start of a breakout, the bubble is not breaking and we may have many more years ahead of us. The markets appear to be telling us something and it began in 2017. Perhaps, it is new technology that will drive this market. Will it be artificial intelligence, biotechnology, nanotechnology, robotics, quantum computers or something that we are not yet aware of?

So, we appear to have the drivers in place. The question is will we have a new long-term bull market or will we see a bubble in a shorter period of time.

The inspiration for this article came from Gary Savage of the Smart Money Tracker, someone who I have recommended for some time. You can follow him on Facebook, here is his link.

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