The Long-Term Winning Machine

Pausing after batting 3-for-3 this week.

The simple fact of the matter is that the S&P 500 rises more than it falls and the average annual gain outpaces the average annual loss. While the crashes and scares sell the best, they are not something we should expect on a constant basis. 

If you want numbers with those claims, it looks something like this:

We are looking at an investment that has delivered a 78.5% win rate since 1950, and an 82.8% win rate when including dividends. In the up years, it has generated a 17% return, and in the down years, it’s only lost about 12%. Just once has it doled out three straight losing years, but 10 times it has doled out three or more consecutive years of gains. 

If you walked into a casino that had a similar setup, where would you place your bets? A casino would never have this game, unless investors could only bet on “down,” because the house would always bet on “up.”

Technical Breakdown 

• NYSE Breadth: 40.6% upside volume

• NASDAQ Breadth: 31.3% upside volume 

Tuesday was what I call a “no day.” It didn’t give us much to work with on the upside and we haven’t had enough corrective action on the downside. That’s fine. Not every day has to be littered with trades. 

Our reversal trade in AVGO paid well and while we didn’t quite get the technical triggers for TSLA, the short worked there too if anyone took it. 

Combined with Monday’s trade in AMD, it has us pausing coming into Wednesday. As I mentioned on Monday, there may be a day or two where there is no game plan for the day as our patience has worked quite well for us this month. 

I will recharge and look for opportunities throughout the day. If something meaningful develops, I will send an afternoon update. Otherwise, let’s prepare for Thursday as we gear up for 2022.