“ . . . A man has rigged up a turkey trap with a trail of corn leading into a big box with a hinged door. The man holds a long piece of twine connected to the door that he can use to pull the door shut once enough turkeys have wandered into the box. However, once he shuts the door, he can’t open it again without going back into the box, which would scare away any turkeys lurking on the outside. One day he had a dozen turkeys in his box. Then one walked out, leaving eleven. ‘I should have pulled the string when there were twelve inside,’ he thought, ‘but maybe if I wait, he will walk back in.’ While he was waiting for his twelfth turkey to return, two more turkeys walked out. ‘I should have been satisfied with the eleven,’ he thought. ‘If just one of them walks back, I will pull the string.’ While he was waiting, three more turkeys walked out. Eventually, he was left empty-handed. His problem was that he couldn’t give up the idea that some of the original turkeys would return . . . ”

. . . Why You Win or Lose, by Fred C. Kelly

I have used the aforementioned Fred Kelly quote off and on for nearly five decades, but I dredged it up again this morning since over the past five months I have received numerous voice mails/emails with the statement, “I should have!” To wit, “I should have raised cash on the October 2 trader’s “sell signal.” “I should have” bought the massive three session “selling climax” lows that ended on Christmas Eve in one of the most oversold readings I have seen in years. Since then the stock market rally has been legendary. The Dow Wow has lifted the senior index some 19%+ from its intraday low into last Friday’s intraday high. Of course the obligatory question following “I should have” is “what should I do now?”

Well to that point, many pundits continue to suggest that we will get a retest of the Christmas lows of 2346 basis the S&P 500 (SPX/2775.60). However, there are many instances where a major low was never retested. The December 1974, October 1975, March 1978, November 1979 lows were never retested and I could name many more. More recently, the March 2009 lows were NEVER retested. Yet the negative nabobs keep insisting the December 2018 lows will get retested. Someone sent us this over the weekend:

"Several weeks ago we did some research to find out what a typical rally looks like after a big waterfall-like decline takes place. The takeaway was that the rallies after those waterfall declines have lasted anywhere from 1 to 74 days and have retraced 20-90+% of the initial decline. That’s quite a wide range in both duration and magnitude of the move, but a universal similarity was that in 19 of 19 post-war instances of a 15% uninterrupted decline (excluding the current one), the stock market ended up testing the waterfall low in some fashion. That is a pretty compelling statistic that flies in the face of what we are currently witnessing."