Here's Your Battle Plan to Beat this Tanking Market...
Remember when it was cool to buy the dips?
Forget it. Buying dips is out in 2016. And today you’re going to learn the new reality and how we plan on trading this precarious market environment…
Stocks suffered their worst start to a new year in history last week. The dip buyers must still be hung over from the holidays, because every tiny bounce was sold. That leaves stocks stuck near 3-month lows and entering correction territory once again.
Ever since we got a Dow Theory sell signal back in August, stocks have chopped most investors to bits with wild swings in both directions.
And we don’t even need old-fashioned indicators like the Dow Theory to tell us that stocks are on the fritz…
Even way back in August, half the stocks in the S&P 500 were in correction territory. Now, only about 25% of stocks in the S&P are above their respective 200-day moving averages. Breadth has been terrible for the better part of the past six months. That means most folks’ stocks are going one of two places: nowhere or down.
If we dig a little deeper than the major averages, you’ll notice that some of the most vulnerable market sectors are completely coming unglued right now. While the major averages are only about 10% off their highs, we’re seeing some real-life bears sprout up elsewhere. And they look angry…
Take the Dow Jones Transportation Average, for example. The trannies fell to their lowest level in two years last week, John Murphy notes over at Stockcharts.com.
“It has lost 25% from its late 2014 high which puts it into bear market territory,” Murphy says. “What’s surprising is that the transports haven’t gotten any help from plunging energy prices. That may carry bad news for Dow Theorists who link the direction of the transports with the Dow Industrials.”
And then there’s the small-cap laden Russell 2000. Unlike the S&P or the Dow Industrials, the rusty Russell has already knifed through last year’s lows. In fact, the six-month performance of the Russell and the transports is downright hideous.
With the majority of stocks looking vulnerable and the major averages in flux, it’s important to note that we could be in for a lot of panic moves over the next several days and weeks. Let’s not make any ourselves.
It’s true that most folks can’t handle the stock market roller coaster. They tend to get out when they should be buying—and buy when they should run screaming into cash. That’s why Wall Street types like to call retail investors the dumb money.
But I have some news for you:
Everyone is the dumb money. Not even the billionaires have any idea what’s going to happen next. The only thing you need to do right now is avoid making any dumb choices. While we’ll be on the lookout for capitulation moves that could signal a temporary bottom this month, markets are incredibly unpredictable and unforgiving when they’re trending lower.