Sure, the broad market is overbought after September’s furious rally pushed stocks to new all-time highs.
But there’s more at play this week than a regularly-scheduled market cool down…
“The week after September options expiration has consistently been one of the worst of the year,” reports Christopher Mistal at Stock Trader’s Almanac. “Since 1988, weekly declines average from –0.93% for NASDAQ to –1.49% for Russell 2000 and S&P 500 has only posted gains five times in 25 years.”
There’s nothing to like about those odds.
A quick review:
Equity funds last week clocked their largest inflows since 2005. A no-taper “surprise” from the Fed helps jolt stocks to new highs. The market’s overbought—and we’re about to enter what has historically been a crappy week for stocks.
Seems about right.
The herd is piled onto the bandwagon. It’s time for some reckless driving to knock some of the newcomers off the ride. If only they had a time machine to help with their trading decisions…
“In hindsight, no birthdays or anniversaries are ever forgotten. In hindsight, eating sushi from the 7-11 around the corner from the office was a bad idea. And in hindsight, we’re all trading geniuses,” quips my trading buddy Jonas Elmerraji. “But the problem with hindsight is that it’s easy to forget about it – especially when it comes to the stock market. It’s way too easy to say, ‘Sure, I would have done it that way anyway’. And after the conspicuous bounce in the S&P 500 since the start of September, that’s exactly what we’re seeing in the financial media.”
In hindsight, investors shouldn’t have been so bearish heading into September. They shouldn’t have ignored the picture-perfect broad market bounce off support. And they certainly shouldn’t be diving headfirst into equities now after a breakneck rally that lifted stocks more than 5% in just a few weeks…
I told you late last week you had your opportunity to book some profits and prep for new trading opportunities. Steer clear of the hindsight traders and wait out the post-Fed hangover. The fourth quarter is just in front of us. After the overbought pressure is released, another strong rally could quickly materialize…
for The Daily Reckoning
Translation: There’s still time to make money before the end of the year. You just need to know where to put your money. That’s where The Rude Awakening comes in… Each morning it gets delivered straight to your email inbox and covers everything you can expect from the day’s market moves. It’s short and to the point, and it’s a must-read for any investor trying to make sense of today’s markets. Sign up for FREE, right here.
Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.
"There has been an issue that has preoccupied my mind for a long time," writes Dr. Marc Faber. "In economics, it is generally accepted that if the quantity of money and credit is increased, prices will rise… However, since economics is so complex… I question whether the expansion of central banks' balance sheets and policies of zero interest rates could have a deflationary impact…" The good doctor wrestles with the question, in today's essay...
The Biotech iShares ETF is up 23% since the Oct. 15th bottom. No, that is not a typo. Biotechs have torched the S&P over the past two months--more than doubling the returns of the big index. And biotechs as a group are up more than 38% year-to-date. In fact, since we first highlighted the June comeback, the Biotech iShares have gone nowhere but up.
The oil market has been under siege for six months. From service providers to producers this downturn has been painful. Of course, we’ve known all along that oil prices were a little toppy over the summer. In fact, when asked just how low oil prices could go I usually answered with a simple “lower than you’d expect…”
Our forecast that Cuba would be open and integrated within 5-10 years is on track after yesterday's big announcement. Ahead of schedule, even. Click here to see how some investors have profited and what the island's likely future is...
The opportunity to sell and install LEDs is enormous. We’re talking about over a billion lighting fixtures. And the areas with the largest potential -- like parking lots -- have barely begun to change. Banker to the presidents Chris Mayer says you could triple your money in this new tech trend. Here's what you need to know.
It's a theme we've shared with you since April. And it's only gotten worse. The gaming industry has come under all sorts of pressure--a situation I first noticed in the charts. The powerful, multi-year uptrends started showing cracks. And it wasn't long before those cracks turned into gaping holes you could drive a friggin' truck through. That's where things stand today.