Stock Market Corrections: 8 Steps For Market Survival
What do you think of when you hear the phrase stock market correction?
If the major media is to be believed, a stock market correction is akin to Armageddon. The sky is falling, etc, etc.
Truth be told, stock market geniuses like Billionaire Warren Buffett see corrections as a fabulous thing. It’s the flip side of a rally, nothing more, nothing less. In theory, corrections adjust equity prices to their actual value or “support levels”. In reality, it is much simpler than that. Prices fall when the market runs out of buyers. If you have cash you can pick up all kinds of bargains. Buffett hoarded his cash as the market got pricey because he said, he couldn’t find anything of value to purchase. In other words he knew the market was overpriced and so he hoarded his cash waiting for prices to come down… as he knew they would.
Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it. Warren Buffett
Here’s a list of 8 things to do during a stock market correction.
Continue reading
Market Parallels to 2000 and 2008
The typical financial disclaimer reads, “the past is no predictor of the future” but learning from historical markets is definately a good thing to do. For some time now Robert Prechter has been telling us to expect a double dip with 2008 being the first wave down. Today we are going to look to Chris Ciovacco, Chief Investment Officer of Ciovacco Capital Management. Typically Chris is a bit more upbeat than Prechter, lets see what he has to say as he compares current market conditions to 2000 and 2008. ~ Tim McMahon, editor
Parallels To 2000 And 2008 Should Not Be Ignored
Before you read your favorite author’s work relative to the outlook for today’s markets, we invite you to go back into their article archives and see what they were saying in early 2008 and the summer of 2008. On February 13, 2008, with the S&P trading at 1,348, we published Technical Breakdowns Call For More Hedging. Unfortunately, much of our analysis from early 2008 applies to the current market, which is showing indications that a new bear market may be on the horizon. Continue reading
Crashing Markets, Credit Downgrades- What Comes Next?
Tragic news about the United States economic atmosphere has been inescapable throughout the country and world for quite some time now. With constant debate over raising the debt ceiling, shocking losses in the stock market, devastating unemployment rates, and a downgraded national credit rating, it’s no wonder the country’s economic health has been in question. After a series of blows to the U.S.’s economic wellbeing, things don’t seem to be getting much better. The country’s credit rate fall has been of great discussion ever since Standard and Poor’s downgraded it by a full point on Monday, August 8th 2011. To add to the blow, the U.S. stock exchange ended the day that Monday down more than 600 points. Continue reading
The Nature of Rallies that Follow Massive Bear Markets
By Tim McMahon, editor
Typically the best time to buy is when everyone else is selling. This one motto has made Warren Buffett a billionaire. He’s said,
Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it…
We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. Warren Buffett
So in October 2008, when things looked their worst he invested $3 billion in General Electric (NYSE-GE). Four months later the market began to recover. Buffett has always been a long term optimist but he is also a realist.
It’s never paid to bet against America. We come through things, but its not always a smooth ride.
Warren Buffett
Since the creation of the Dow index there have only been three “Massive” corrections, where “Massive” is defined as a decline of more than 50%. Two of them happened at the beginning and end of the great depression. The third one began in 2007 and bottomed in 2009 and we are in the process of recovering from it. The only other comparable market decline was the Nasdaq “Dot Com bubble” that burst in 2000 resulting in a 78% decline in the NASDAQ with the associated post crash rally beginning in 2002.
So the following chart from our friends at Chart of the Day compares the four rallies that followed the four massive declines, i.e. the current 2009 rally, the 2002 NASDAQ rally, the 1942 Dow rally and the 1932 Dow rally.
Six Straight Weeks of Decline Take DJIA Below 12,000: What Now?
Before blaming falling stocks on the most recent weak economic reports, let’s check some dates.
As of June 10, the Dow has suffered the “longest losing streak since the fall of 2002. The market’s last seven-week stretch of losses began in May 2001, as the dot-com bubble deflated,” reports The Associated Press.
As for why stocks are falling, most observers agree: Blame “weaker hiring, industrial output, and a moribund housing market.” The economic reports from the past two weeks made that clear.
But wait a minute. The DJIA didn’t top in the past two weeks — Continue reading
Precious Metals vs. the USD
An interview with Karen Roche of The Gold Report
One sure upshot of the quantitative easing money flooding the stock market will be further distortions, chaos and unpredictability that make the value-investing proposition difficult, if not impossible, according to Casey Research Chairman Doug Casey. On the eve of a sold-out Casey Research Summit in Boca Raton, Florida, Doug returns to The Gold Report. In this exclusive interview, he warns, “Like it or not, you’re going to be forced to be a speculator.”
The Gold Report: When the average investor turns on the news, even on financial channels, they hear that the U.S. economy is in the best shape it’s been in for three or four years. While the experts say the recovery is slower than anticipated, they expect its slow recovery will equate to a long, slow growth cycle similar to that after World War II. You have a contrary view.
Doug Casey: The only things that are doing well are the stock and bond markets. But the markets and the economy are totally different things – except, over a very long period of time, there’s no necessary correlation between the economy doing well and the market doing well. My view is that the market is as high as it is right now – with the Dow over 12,000 – solely and entirely because the Federal Reserve has created trillions of dollars, as other central banks around the world have created trillions of their currency units. Those currency units have to go somewhere, and a lot of them have gone into the stock market.
The Sector Where Individuals Can Still Beat The Big Boys
Wouldn’t it be great if there were a sector where you have the edge over the Goldman Sachs of the world?
A market where small players can outmaneuver the big guys – and where having knowledge of that market gives you a distinct advantage over day traders?
Such a market exists – biotechnology. Small and mid-cap biotech firms don’t get a lot of close coverage by analysts, so with the right expertise it’s possible to beat the masses to the early profits.
Our colleague, Alex Daley, the chief technology strategist for Casey Research and senior editor for Casey’s Extraordinary Technology, recently sat down with The Daily Crux to reveal valuable insights on investing in this explosive sector:
- Why biotech is offering hope to millions of chronically ill people – and serious profits for bold investors
- Why nine out of 10 biotech therapies are destined for the trash heap – and how to improve your odds of investing in the winners
- Key factors you need to know when evaluating biotech stocks
- …and much more.
When Alex talks technology, smart investors listen – he’s worked with Microsoft, Facebook, MySpace and many other household-name tech firms, as well as renowned research universities like MIT and Harvard.
He’s also been a featured guest on CNN, CNBC, BBC and other major media.
So grab a cup of coffee and discover some of Alex’s strategies for uncovering profitable biotech stocks. Continue reading
Trends in the U.S. Dollar, Stocks and Gold
Today we have Chris Vermeulen “The Gold and Oil Guy” to tell us a bit about where the massive deficits will take the Dollar, Stocks and Gold. ~editor
Gold and Stocks Heading Higher with GDP Crashing
As most investors and traders are aware, the U.S. Federal government has run up significant deficits and the long term debt burden is becoming a drain on Gross Domestic Product. That being said, most economists are discussing the possibility of a major decline in the value of the U.S. Dollar going forward as inflationary monetary policy begins to strangle growth. While that view point may prove right over the long haul, in the short run most traders are not likely expecting the U.S. Dollar to rally.
The U.S. Dollar is expected to reach a multi-year cycle low in the near future. From the cyclical low, I expect the U.S. Dollar to regain a strong footing and work higher against the crowd. This is not to say that the U.S. Dollar will not eventually decline, but financial markets do not work that easily. Shorting the U.S. Dollar is a crowded trade and Mr. Market punishes crowded trades quite often by pushing prices the opposite of what the herd is expecting. Should the U.S. Dollar find a strong underlying bid, precious metals and domestic equities would feel the brunt force of such a move. While it remains to be seen if the U.S. Dollar rallies, if it does it will catch many traders and economists by surprise and the unwinding of the short dollar trade could unleash a wave of buying that we have not seen for quite some time.
Let’s take a look inside the market…
Earnings Drive Stock Prices? See This Chart Before You Answer
A free Club EWI report exposes the TEN most misleading myths of Wall Street, including this one: “Earnings drive the stock market.”
Since the time of buttonwood trees, Wall Street has had its own version of the Ten Commandments — the cornerstone principles of conventional economic wisdom. The first of these writ-in-stone notions is the widespread belief that earnings drive the stock market.
By this line of reasoning, knowing where a market’s prices will trend next is simply a matter of knowing how the companies that comprise said market are expected to perform. On this, the recent news items below capture the public’s devoted following of earnings data:
- “Stocks Rebound As Investors Await Earnings.” (Associated Press)
- “US Stocks Drop As Earnings Data Fall Short” (MarketWatch)
- “Sideways Market Looks For Direction: Earnings Could Point The Way” (MarketWatch)
In reality, though, much of this belief is based on faith, not facts. While earnings may play a role in the price of an individual stock, the stock market as a whole marches to a different drummer. Continue reading
Trade The Trend in Gold, Dollar, S&P500
Today we have an analysis by Chris Vermeulen “The Gold and Oil Guy”. Chris has some rock solid tips on trading choppy markets like we are seeing now. Picking tops can be very difficult and costly so check out Chris’ advice in the final paragraph. It’s worh its weight in Gold!~ Tim McMahon, editor
Dollar, Gold & SP500 Trend Trading
November 10th, 2010
It has been a roller coaster week thus far as stocks and precious metals plunged on heavy selling volume on the back of a rising dollar, only to make a strong rebound Wednesday. While there has been significant intraday price movement, it was no surprise to us as we have been anticipating this pullback since discussing it in my Sunday Gold Newsletter.
Let’s take a quick look at the charts…
US Dollar Daily Trading Chart
The past couple weeks the dollar has traded in a choppy fashion, and last week I mentioned to subscribers to keep any new positions small. The dollar looked ready to make a bounce and if it reverses we will see stocks and commodities correct rather sharply.
Last week we trimmed some profits on our gold and SP500 trading positions in anticipation of a rising dollar/lower equity and metals prices. The dollar is currently in a down trend so we are still trading with the trend, but the next couple sessions could potentially change that.
As you can see on the chart a similar pattern to what we saw during Continue reading
