The Market Is Going Up, And Here’s The Only Signal That Matters

bullish market trend with a charging bull and upward stock market graph, symbolizing rising prices and financial optimism in global trading, vector illustration eps10

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The first real lesson I learnt about investing and trading – one I picked up at the age of 11 but took nearly 30 years to truly understand – is this: “The only thing you need to know about a market or asset is whether it’s going up or down.”

It is such a truism that it’s almost laughable. But do you actually know which way the market is going? Can you even make a reasonable guess – and over what timeframe?

Suddenly it’s not such a silly statement, especially when theory insists you can’t know, and so many people throw their hands up and say, “What do you mean?” or “I don’t care” and, quite often, “I don’t know.”

If you don’t know which direction the market is heading, why are you in it?

It’s practically a truism to say: “It’s hard to make money in the market if it’s going down.” And it’s certainly close to impossible if you’re long, as most investors are. It’s easy to make money when it’s going up, and if you’re sensible and steady it becomes almost impossible to lose – whereas when the market is falling, it becomes only marginally possible to win.

So after the market’s recent nasty dump, let’s assess the direction.

As expected, the impact of the U.S. government shutdown and the disruption from the Federal Reserve’s policy changes have faded. The liquidity squeeze that had been pressing on asset prices is easing, and the market is rising again on most fronts.

But that’s just the short-term trading environment – not the big picture, which is what we should really care about.

So here’s the setup:

From this perspective, it’s clear we’re in a bull market. No surprise there. We can also see the detours when something unexpected and negative hits. When an unforeseen shock arrives, the market dives, and as it works its way through the system, we eventually get a recovery and a resumption of the very long-term trend.

So let’s look at that – and, as I’ve always believed, if you can’t draw the trend with a fat Sharpie, then don’t bother.

Of course, you can zoom out even further:

…and that’s all you really need to know, with one exception.

The one remaining question is: Is there anything that could derail this trajectory?

Right now, the answer is no.

That’s not to say nothing will come along, but the bottom line is that it will take something truly massive to derail this market. Day to day, we should relax, keep an eye on the horizon, and watch for both terrible and fantastic events far in the distance. In the short term, you should embrace the rising market and remember: to stop the climb – or even punch meaningful holes in it – would require large, obvious catalysts.

So here we are, in the after-party of the recent liquidity squeeze, with a highly likely strong bull period ahead. Soon enough, the latest doom-meme will flood the media, but the market will keep grinding upward. We should remember: stocks make us rich; media doom makes the media rich.

For now – and likely for the next year or two – the market is heading higher. Yes, it will crash; it always does. And we’ll try to avoid the crash. But the real disaster is avoiding the market when, despite all the bad news, crises, plagues, and wars, the long-term trend is up. That’s the lesson I was told as a child, and it really is all you need to know.