Here's How Easy it is to Lose Money in the Stock Market Right Now...

Trading’s not supposed to be easy. But this is getting ridiculous…

The major averages were sprinting to their fourth whipsaw day in row Wednesday. As if this choppy action didn’t create enough confusion, the Fed’s now whispering that it might raise rates next month. By the end of the trading day, the major averages were mostly breakeven as traders dumped utilities and jumped into bank stocks…

The market’s a hot mess once again. After a brutal start to the year and an improbable run off its lows, the S&P 500 has sagged back to breakeven on the year. It doesn’t matter if you’ve bet big on breakouts or breakdowns this year. If you didn’t take the money and run, you’re right back where you started—or worse.

Sure, the S&P is around the same spot it was in late 2014. But that fact doesn’t come close to describing what the painful, never-ending chop has done to traders and investors.

Let me explain…

They say a rising tide lifts all boats.

During a bull market, most stocks move higher. Sure, you’ll see market leaders that easily beat the major averages. And you’ll have your lagging stocks that might post modest gains—yet trail their benchmarks. But overall, the rising tide is forgiving. Investors’ boneheaded mistakes aren’t punished as severely as you would see in a down market. Traders aren’t blowing up their accounts. No one is scared.

Then you have your bear markets. When the market is trending lower, stocks tend to be heavily correlated. That means they all usually move up and down together. Sure, you’ll see your fair share of bear market rallies. But overall, you have a situation where you can bet against the indexes without having to worry too much about rogue trades stomping your returns.

Are we experiencing either of these market environments right now?

Heck no!

Right now, we’re stuck in some nasty market chop.

A choppy market is like a booby-trapped hallway in a haunted house. You have to watch your step! If you aren’t paying close attention, a trapdoor could open at any second and send you plunging to your death.

“The reason for the seemingly endless trading range has been the rolling bear markets across different industries and sectors,” writes MKM Partners chief technician Jonathan Krinsky. “It began with Energy and Materials in late 2014, spilled into Industrials, Financials, and Biotech, and most recently Retail. While the SPX has only suffered a 14% drawdown peak-to-trough, 20 of 24 industry groups have seen at least a 15% drawdown.”

Once again, the major averages aren’t telling the whole story. They’re not even speaking the same language anymore. While the averages have chopped along, we’ve had to endure one mini bear market after another. The market’s spinning so fast that it’s nearly impossible to keep track of what group of stocks is leading or lagging on any given week…


Ever since the market turned lower at the start of the year, we’ve seen pundits take sides and form allegiances. Higher or lower from here? That’s the big question that’s readily answered by every article, blog post, and tweet– with plenty of evidence to back up the claims, of course.

But everyone has been dead wrong. Instead of a bull or a bear, we’re stuck with the one option that nobody wanted. I’m talking about the ultimate pain: a sideways market. Bulls and bears beware. In 2016, neither side wins.

The Chop takes no prisoners. It’s a monster that’s all too eager to rip your hard earned gains from your lifeless hands…


Greg Guenthner
for The Daily Reckoning

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