I bring up Granville for obvious reasons: The anniversary of his terrible market call coincides with the unnerving plunge in Chinese markets. For those of you who may be unfamiliar with the whole story -- spoiler alert! -- here is the coda to Granville’s market-timing recommendation. As the chart below shows, 1981 was just about the start of the greatest bull market the world has ever seen, rising 1,447 percent during the next 20 years. Granville, who died in 2013, never managed to admit his error or reverse himself; he ended up being consigned to the dustbin of history, his track record in tatters. Mark Hulbert, who tracks the performance of investment newsletters, noted in 2005 that Granville's letter was at the bottom of the “rankings for performance over the past 25 years - having produced average losses of more than 20 percent per year on an annualized basis.” Ouch.

I bring up Granville today as a reminder of the many risks we undertake when we 1) try to time markets; 2) take ourselves too seriously; and 3) refuse to acknowledge our fallibility.

It’s the last of those three that has been most resonant this week. Some perennial bears have been declaring vindication for their great market insight -- this despite having missed the better part of a 250 percent rally since this bull market began.

My colleague Ben Carlson makes several astute observations about this, perhaps the most important being that “your favorite pundit isn’t going to be able to help you make it through the next bear market.” A close second is that “the majority of the people who have been scaring investors by predicting a bear market every single month for the past seven years will be the last ones to put their money to work when one actually hits.”

The bottom line is this: The relentless rising trend for markets has been broken, and whether it is going to recover anytime soon is unknowable. Your best bet is to have a plan, stick to it and keep your own counsel.

Oh, and don’t try to be a Granville. It’s a career-ender.

David Fuller's view

No one can predict the future.  However, we can make some strategic educated guesses in stock markets, by being interested in market history, by paying attention to market valuations, by being disciplined investors, by understanding crowd psychology, by paying attention to the trend of governance in markets of interest and most of all, in my opinion, by observing markets via price charts and using a practical, factual common sense approach to what I have called Behavioural Technical Analysis throughout my career. 

Perhaps the most useful paragraph in the article above is the penultimate one.  Yes, the uptrends for nearly all stock market indices have been broken.  Short-term oversold conditions are evident following this week’s sharp selling.  Nevertheless, persistent rebounds are required, which break the patterns of lower rally highs, to partially repair the overall technical damage.  This may require a prior break in the Continuous Commodity Index’s overall downward trend.