Wednesday, November 11, 2015

The next 1000-point down day is coming.............

The Next 1000-Point Down Day Is Coming

Before the Monday, Aug. 24, thousand-point down day, I warned readers to be ready for the market to correct, quite possibly via an "elevator drop". Prior to the "mini flash crash" as I've heard it called, I warned that "things were getting bearish," and "stocks were not properly priced." 

Retail investors are getting it half right, moving money out of stocks for the past year. Most have done so out of fear of the "next collapse," as they did in early 2009 before finally reinvesting around 2012. This time, they are close to their portfolio highs from the middle 2000s and believe they should get out of the stock market before the next crash. That makes some sense, better to pre-panic than post-panic.

Investor fear, primarily among baby boomers, is probably well founded in the short-term. The world is facing serious economic headwinds driven by demographics and debts. The combination of investor skepticism, a slow economy and a Federal Reserve that keeps talking tough makes it very probable that we are going to get another thousand-point down day. 

How horrible will it get for the stock market? 

How far will emotional sellers and traders drive the markets down? 

Will it be the beginning of another financial collapse? 

I believe fear and emotional selling will drive the stock market down into official bear-market territory. 

Market structure could have something different to say about the ultimate bottom. This year, the traders have taken most control of the markets away from investors. It really is a remarkable phenomenon as they move from sector to sector, and stock to stock, blowing things up while the biggest stocks barely notice. 

Could the traders blow the whole thing up? 

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