There are rising concerns that the stock market is in a bubble. But that concern is pretty common when we look back through time. After all, in December 1996, then-Federal Reserve Chairman Alan Greenspan noted that…
Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets.
We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past.
But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?
Irrational exuberance became a common phrase among economists and traders.
Source: Google Ngrams
In addition to creating a new phrase for investors, Greenspan cemented his reputation as a flawed market timer.
We may be in another “irrational exuberance” moment. Since the March 2020 bottom, we’ve seen a rapid rally in stocks that has pushed stock market averages significantly higher. But, in a historical context, the gains are actually almost normal.
The one-year annual change in the S&P 500 is shown at the bottom of the chart. As you can see, there are numerous examples of sharp rallies. The bull market that began in 1982 had an even stronger start than this recent rally.
While we may be near a pullback, we could also be near the beginning of an “irrational exuberance” rally. Personally, I don’t believe that’s the case, but I will be open-minded and follow the trend.
How I’m Trading Right Now
In a recent issue of my premium service, Income Trader, I noticed a short-term trend in a stock that is known for its strong long-term uptrend: Apple Inc. (Nasdaq: AAPL).
In the long run, AAPL has gained more than 6,200% since the March 2009 bottom in the stock market. In the short run, the stock provided an Income Trader Volatility (ITV) “buy” signal after completing a brief pullback.
Now, I don’t believe AAPL will gain another 6,000% in the next few years. But it is still a great long-term investment.
However, as always, my focus is on the short-term income opportunity. We can use our put-selling strategy to best take advantage of it.
I developed the ITV as a tool to specifically to tell me when an individual stock’s volatility reaches a short-term peak. This allows me to balance the potential risks and rewards of the trades we make over at Income Trader.
So while most traders would take a look at a chart like this and simply buy AAPL, over at Income Trader, we can use our simple strategy to generate immediate income from AAPL. In fact, if everything goes according to plan, we’ll be in this trade for less than 45 days, pocket our income, and move on. We also have the ability to make another trade like it if we want to generate additional income.
I like to think of this strategy like having your own “P.I.N.” or personal income number, if you will.
Instead of chasing bubbles, I stick with proven ideas like this because they have proven to work in just about any market environment.
My proven system tells me exactly when share prices are going up or down. Unlike many traders who stab in the dark for price swings, my system leads to thousands of dollars in reliable income every month. In fact, over 90% of the trades I recommend to readers are successful.
The best part? It takes only a few minutes per week to make these trades. A few minutes could earn you enough extra income to free you from relying only on Social Security, your savings, or even your job. It could give you the free time and wealth you need to pursue a new hobby or live on your own terms — regardless of what’s happening in the market.
If you’re interested in finding out how my system works and how easy it can be start earning thousands of extra dollars per month, I invite you to click here.