Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Stock Market Falls - What to do now ?

Stock-Markets / Forecasts & Technical Analysis Mar 02, 2007 - 12:53 PM GMT

By: Hans_Wagner

Stock-Markets

On Tuesday February 27, 2006, the market once again told everyone that it is in charge with a 3.3% drop in the DJIA. When the market makes a move like it did, the first thing to do is step back and assess your situation. History shows us that significant drops in the market are not the start of a new bear market. There are exceptions; however, we are looking at the probabilities. As a result I do not believe this is a bear market. At least not yet. Days like today are often followed by further declines. Most times falls like this, present buying opportunities over the next few days, sometimes up to weeks.

This fall was caused by several factors including:


  • Chinese authorities seeking to control the speculation in the Shanghai Stock Market. The stated they were considering requiring the equivalent of stricter margin requirements when buying stock. It was up 13% in the last week or so. 

  • Glitches in the hybrid trading system used on the New York Stock Exchange. It was more difficult to get a sell limit order executed in the afternoon.

  • Problems with calculating the DJIA when it fell 200 points in the matter of minutes. Caused more panic.

  • Concern that the impact of sub-prime mortgages in the U.S. will cause further problems in the U.S. financial system.

  • Concern that Alan Greenspan called for a possible recession at the end of 2007, even though he made the statement last week. And all he said was that if certain things were to happen in the economy we might see a recession.

  • Concern that the global economy was slowing down faster than people once thought. So far China, India and the other emerging economies are growing and show little signs of slowing down. This does show investors and traders recognize we are now in a global economy.

If you are an investor, not a day trader, here are my thoughts on what to do now: 

  1. If you hold a lot of long positions, then be sure your stops are in place. Evaluate your positions to see where their support levels are and if you want to close out your position if this support fails.
  2. Make a list of stocks you want to own once the market turns back up. Identify entry levels. I am working hard on updating my watch list right now.
  3. Monitor the market activity and down turn signals that you use to tell if the market is turning, just in case the probabilities are wrong this time. By the way all my indicators do not show a down turn yet.
  4. Wait to enter new positions until the selling frenzy has ended the market looks to be holding its position.
  5. Watch for potential shorting opportunities if they present themselves, keeping in mind that this is not a trend reversal, so the trades will be quick, 1-5 days.

I am glad I have been holding in cash as this makes the down turn easier to handle. It also provides fuel for good buying opportunities.

By the way, I thought this chart was interesting. It is from Breakpointtrades.com. After the market closed for 2/27/07, it shows the SOX (Semiconductor index) in relation to the NASDAQ, DJIA, NDX and the S&P 500. It shows the SOX is starting to outperform these indexes. This can be a good sign for the market, as the SOX tends to lead the NASDAQ which tends to lead the overall market. Just something to keep in mind as the week unwinds.

 

by Hans Wagner
tradingonlinemarkets.com

My Name is Hans Wagner and as a long time investor, I was fortunate to retire at 55. I believe you can employ simple investment principles to find and evaluate companies before committing one's hard earned money. Recently, after my children and their friends graduated from college, I found my self helping them to learn about the stock market and investing in stocks. As a result I created a website that provides a growing set of information on many investing topics along with sample portfolios that consistently beat the market at http://www.tradingonlinemarkets.com/


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules