Posted on 02/10/2016 9:36:08 AM PST by Citizen Zed
Intense selling dominated the first 20 days of 2016, but the next 20 days were chewed up by sideways trading without any net progress. Here is the year-to-date "tale of two markets" at a glance.
Periods of intense selling tend to spark discussions about market crashes or recoveries. In reality, periods of emotional intensity are typically followed by drip-torture style (volatile) rangebound trading (with the exception of the 2013/14 V- shaped recoveries). That's what we've seen the past 20 days.
The question is this: What happens after the rangebound period ends? Here are some clues:
The 'Terrible January Pattern"
The S&P 500 lost 5.07% in January. Since 1970, the S&P lost more than 5% in January seven other times (1970, 1977, 1978, 1990, 2000, 2008 and 2009). The chart below plots the average annual performance of those years (black graph) against the year-to-date performance (red graph).
The initial panic low (on average after 20 trading days) is usually followed by a bounce and another low (on average after 45 trading days) before carving out a more sustainable bottom.
'Meltdown Pattern'
In 2011, the S&P 500 lost 18% in 12 days.
In August 2015, the S&P lost 11% in 6 days.
In 2016, the S&P lost 12% in 14 days.
The 2011/2015 meltdowns were followed by a period of sideways trading and a break/test of the initial panic lows.
(Excerpt) Read more at marketwatch.com ...
It’s always one or the other.
House of Cards where mostly only perception counts.
You don’t buy a house for one year and you should not invest in stock for 1 year.
The next time my Netflix stock NFLX gets in the $120’s I think I will sell.
The chart going back to July 2015 shows about every 2 months it goes up then goes down. I have held since July and gone along for the ride. If only I had sold a few times at the high I could have had hundreds more shares.....
Once I sell then I will hope the stock repeats like the past months and goes down then I will buy again : )
That's why being a financial commentator is such a great job. No matter what the question is, just respond by saying, "We could be seeing a trend here, or it could be just a temporary blip."
Then present graphs to illustrate both possibilities. Then go down to payroll and collect your six-figure paycheck.
Good luck. Range trading works... until it doesn’t. Hope you get a couple more bounces.
>>...present graphs to illustrate both possibilities. Then go down to payroll and collect your six-figure paycheck.
Sounds like a plan.
There will be a melt down. But its not coming now. March, April, May will have enough market buyers that a melt down will be unlikely. June is often soft but July has been very strong for the past ten years. However, you can watch out below in the fall. Almost all crashes occur in October or November. And if there is a crash it will be foreshadowed by exaggerated volatility in August and September.
You can think of the markets in the fall like a trapeze artist flinging himself from one swing to another. In a crash, the new swing does not come in time. Many large market participants sell many of their holdings for various reasons (taxes, window dressing, locking in profits) and position themselves for the next year. If they see a downturn in the next year they may hold significantly more cash. And so, their sales become a crash.
End Time Bible Prophecy Ping
Harbinger/Shemitah
Year of the Shemitah. The principle of sabbatical years of the land.
To be on the End Time Bible Prophecy Ping List, FReep mail me or Saveferris
Yeah, I figure when I sell it will then go up and up. Netflix was at one time at $700 till their 7 to 1 split last year.
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