Still Waiting for TWO Successful Re-Tests

Last week we offered commentary on the turmoil in the markets. We suggested that the lows established in the middle of March 2025 needed to be successfully tested twice before we could be relatively certain the bottom had been reached.

It is important to recognize that “bottoms” are reached when mob psychology cannot get any worse. There is nothing trickier than forecasting mob psychology. Also, on that list of tricky things to do is make predictions regarding macroeconomic conditions. Witness some of the more absurd statements made by Federal Reserve officials regarding inflation in the early part of this decade. These are people with armies of analysts with piles of data to review, before asserting their opinions.

Guessing the time frame it will take for the Chinese dictatorship to decide to go for equal tariffs with a country that buys five times as much product from them as they buy from it, seems no easier. Communist dictatorships are inherently unpredictable. A case in point is Putin's obsession with Ukraine.

Anyone watching CNBC for financial insights might want to check themselves into a mental hospital. It is not that there are not some people appearing as guests on CNBC who know what they are talking about. There are. However, hysteria is good for business, which explains why CNBC and every other channel and network with a 24-hour programming schedule ponies up hysteria every chance they get. They need viewers. Lots of them. So, sorting through all the noise being peddled as "market analysis" on television is not worth the time or the trouble.

A better strategy is to always recognize that sickening drops in stock prices are possible. And when they occur, they represent wonderful opportunities to pick up the winners of the next five to ten years at bargain basement prices. Buying when the price action in the market is sickening takes guts. Nobody wants to jump in front of a moving freight train and tell the train where it must stop, simply because there might be some money to be made someday being brave.

If you own high quality winning common stocks and you hold them. You are already brave. Even the best stocks get stomped every so often.

Having been through quite a few of these downturns over the last forty-five+ years we called for two successful re-tests of the mid-March lows before stepping in with our reserves. We got one successful re-test of the mid-March lows on March 31st and the second re-test attempt on April 4th failed and we made a decisive new low. We made another new low again on April 8th.

We posted this commentary after the spectacular rally on April 9th that already failed earlier today, which is April 10th.

What happens next? We will still wait for two successful re-tests of the April 9th lows. Will it happen soon?

Will your manic-depressive uncle stop behaving insanely? That’s a tough call.

Having the right temperament is the key to winning the game. Astute investors realize they cannot prevent runaway market emotions or predict them. The only thing we can do is realize that sometimes emotions run red-hot and other times they run stone-cold.

Keep an eye out for the second successive re-test of the April 9th lows. If we make a new low, mark that number and date down and wait for two successful re-tests of that level before deploying your reserves that are set aside to take advantage of these kinds of extraordinary opportunities.

Stay tuned. The air is rough right now and we are encountering turbulence. Keep your seatbelt fastened and whatever you do……do not jump out the window.