trading strategies

I was listening to a Meb Faber podcast recently. Faber referenced a study by Longboard Funds' Eric Crittenden that found 80% – eighty percent – of all stocks have returned 0.0% – zilch – since 1989.

That's a pretty explosive "allegation," if you will, so I immediately geeked out! I had to track down and read the study and run a few tests on the conclusions, to see for myself and for my readers.

The finding, which I confirmed independently, is shocking: The report, with its immense implications for investors, is correct.

Last week, I shared a really big chart with everyone; it had lots of "stuff" on it that told the story of the past few months as we transitioned from smooth, unambiguously bullish action to the violent rallies and sell-offs – volatility – that defined the end of 2018.

Today, we'll look at just very recent trading, so we can see that the two main support and resistance levels are still in play in stocks. We're not strolling down memory lane; a lot of unprepared investors are going to live or die by these levels, and folks "in the know," like us, will determine their moneymaking posture using these numbers.

In fact, I'll go one better: I'll add two levels – one short-term support level, and the longer-term resistance level that will come into play when 2,600 is finally broken one way or another.

Whenever markets get like they are now, everyone loves to talk cash – cash on hand, cash coming off the sidelines, going to cash, cash, cash, cash. Watch any financial news show on cable, and it won't be long before you hear it mentioned.

This is one of the funniest discussions I think I have ever heard. That it's even up for debate is pretty ridiculous, but I guess they have to fill airtime with something.

Particularly dumb is the chin-wagging about the "low returns" on cash these days.

The return on cash is minimal, I agree, and for sure it's more comfortable to hold cash when you're collecting a nice interest payment, but earning interest is not – repeat, not – why you hold cash.

How much interest does a carpenter earn on his hammer? None, of course… but he can sure make a big pile of cash putting the hammer to work.

It works the same way with stocks. Cash is a tool – an essential tool – for investors.

Having cash means you can quickly and easily take advantage of bad markets or jump on "fallen angel" opportunities that come along from time to time. Being able to do that at will is the difference between doing okay as an investor and doing really freaking fantastic as an investor.

So that leaves us with two questions: "How much cash should I have in my portfolio, and what should I do with it?"

Those are big questions that investors have grappled with for years. I'm going to show you the answers.

Every January, without fail, TV and online publications run endless stories on the best New Year's resolutions to make. You've probably seen a million of 'em this week.

Always rounding out the top of the list: "Make more money."

And the sad truth is that, by February, at least 90% of people have already failed. It's not for lack of trying or because making more money is somehow impossible. It isn't.

In fact, it's a combination of reasons, like early setbacks, bad investing and trading research, poor risk management, or too-small gains (yes, small profits – more on that in a second).

At the end of the day, an analyst's job is to take a complex thing, make some kind of good sense of it, and let his or her readers know what the data tells them.

When that complex "thing" is stocks, there are a few ways we can do that.

A fundamental analyst is going to look at things like cash flow for a company or the S&P 500, and… make some sense of it, and make an educated, informed guess as to what's going to happen – where those fundamentals will be in the future.

A technical analyst like me is going to look at history (in the form of charts) and determine – you guessed it – what's going to happen – whether history's going to repeat itself or not.

And so I'd like to share a chart with you all today. Not just "a" chart, but the chart that tells us not only where we've been, but more importantly, what to expect in the near term.

Many investors ask whether they have enough data to make a decision, but many times that data comes in the form of dreaded statistics.