Was Last Week's Stock Market Price Tumble Just a "Correction"?
Stock market prices tumbled pretty dramatically last week. Those sorts of drops usually reflect an "air pocket" under prices that have risen without lots of strong, steady demand. Whatever demand existed is exhausted and then there are no more willing buyers left. Something triggers a selling spree, but no one's waiting to buy. That's your air pocket.
There was talk about "buying the dips" on financial media, but it's not like anyone stepped up to the plate right away. Whoever did eventually buy took their sweet time.
And so this week, after a big move up yesterday, we find ourselves wondering whether that was it, or whether we can expect more downward pressure. At this point, a further drop, testing the recent lows, wouldn't be a shock. That could open the door for the famous "year-end rally" that we've all come to know and love over the years.
But what happens if that testing of lows turns into an even farther fall?
Our sources have been mixed as to whether the stock bull market either has ended, is close to an end, or remains in place. There's no broad consensus.
As for the various indicators we use to gauge how things are going in various markets, none of them have signaled anything that would cause us to sell our stocks in any significant manner. These indicators include various ratios we monitor, moving averages, and some proprietary measurements that have proven to be relatively reliable in the past.
We typically pay attention to both people we consider reasonable and somewhat reliable, as well as these more "objective" indicators. The indicators typically bear more weight in our decision-making, since even the smartest among us aren't perfect. Then again, neither are indicators. But the thing with indicators is that they're not moved by emotion or prejudice.
In the end, of course, you're left with a little of this in your right hand, and a little of that in your left. You look both ways, think about what you've got in your hands, then make a decision.
This time the decision was: Do nothing right now. Leave well enough alone.
On the other hand, we have been sensing some unease in the analyses we've studied lately. Some of it didn't even require sensing. It was pretty direct. But even those more positive on stocks have been hedging their bets.
So at the end of the day, we've increased our vigilance.
With the first inklings of Christmas beginning to surface in the distance, we recall this line from A Night Before Christmas: "While visions of sugarplums danced in their heads." Similarly we've been having visions of "Bear Market" dancing in our heads.
But so far, it's just a vision.
There was talk about "buying the dips" on financial media, but it's not like anyone stepped up to the plate right away. Whoever did eventually buy took their sweet time.
And so this week, after a big move up yesterday, we find ourselves wondering whether that was it, or whether we can expect more downward pressure. At this point, a further drop, testing the recent lows, wouldn't be a shock. That could open the door for the famous "year-end rally" that we've all come to know and love over the years.
But what happens if that testing of lows turns into an even farther fall?
Our sources have been mixed as to whether the stock bull market either has ended, is close to an end, or remains in place. There's no broad consensus.
As for the various indicators we use to gauge how things are going in various markets, none of them have signaled anything that would cause us to sell our stocks in any significant manner. These indicators include various ratios we monitor, moving averages, and some proprietary measurements that have proven to be relatively reliable in the past.
We typically pay attention to both people we consider reasonable and somewhat reliable, as well as these more "objective" indicators. The indicators typically bear more weight in our decision-making, since even the smartest among us aren't perfect. Then again, neither are indicators. But the thing with indicators is that they're not moved by emotion or prejudice.
In the end, of course, you're left with a little of this in your right hand, and a little of that in your left. You look both ways, think about what you've got in your hands, then make a decision.
This time the decision was: Do nothing right now. Leave well enough alone.
On the other hand, we have been sensing some unease in the analyses we've studied lately. Some of it didn't even require sensing. It was pretty direct. But even those more positive on stocks have been hedging their bets.
So at the end of the day, we've increased our vigilance.
With the first inklings of Christmas beginning to surface in the distance, we recall this line from A Night Before Christmas: "While visions of sugarplums danced in their heads." Similarly we've been having visions of "Bear Market" dancing in our heads.
But so far, it's just a vision.
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