Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

This Rally Is a Symptom of a Stocks Bear Market, Not a Bull Market

Stock-Markets / Stock Markets 2019 Jan 24, 2019 - 06:48 AM GMT

By: John_Mauldin

Stock-Markets

BY ROBERT ROSS : “Did you see that the stock market had its best day ever today?”

That’s a quote from my mother.

It was the night of December 26. Earlier that day, the Dow Jones Industrial Average had surged over 1000 points.

Some people saw this as a sign that investor confidence had returned.

But big surges like this are common during bear markets. In fact, they happen more in bear markets than bull markets.


The Biggest Mistake When Measuring Market Moves

Here’s the key to judging market swings: Never measure the market’s gain or loss in terms of points.

You should always look at a percentage move.

Here’s why.

The biggest stock market move in history was a 500-point drop. It was Black Monday, October 19, 1987.

That is half of the December 26 move in terms of points. But it was a crushing 22% loss in a single day.

The December 26 move might have been 1,086 points, but it was only 5%.

This Volatility Is Typical of a Bear Market

Such percentage moves are quite common in bear markets.

In fact, the 5% move doesn’t even crack the top 20 percentage gains since 1900:



The record shows that bigger single-day gains tend to happen in the worst bear markets.

Don’t get too excited, though. Because this pattern cuts the other way.

Take a look at this table:



Again, history shows us that the largest one-day market declines are much more common in bear markets.

So, in a bear market, investors should expect higher stock market volatility both ways.

This has major implications for your portfolio.

Don’t Buy the Dip, Sell the Rallies

The hashtag #BTD is wildly popular on Twitter. It stands for buy the dip.

It means that when the stock market falls (or “dips”), investors should take advantage of the cheaper prices and buy.

There were thousands of people using this hashtag during the 15% sell-off that preceded the December 26 stock market bounce.

But there’s another, less-common hashtag: #STR

This stands for sell the rally.

This means that when the stock market jumps higher, investors should use it as a chance to sell their risky stocks and buy safe assets.

Big one-day market spikes are nothing to cheer. And they don’t mean the downtrend is over.

Rather they are warnings that more downside volatility is ahead.

Gold Streaming Companies Are the Safest Hedge

Gold is one of the best hedges against market volatility. When markets fall, gold tends to rise.

A common way to get exposure to gold’s price is to buy gold miners. But there’s a much safer and more profitable breed of gold companies to invest in.

It’s gold streaming companies.

The company I recommend in this sector is the gold and silver streaming company Wheaton Precious Metals (WPM).

Here’s how it operates.

WPM provides cash up front to mining companies to help them run and expand their operations. It becomes something like a silent partner.

In return, it receives the right to buy gold and silver from the miners’ future production at an agreed price.

And that’s good for a couple of reasons.

First is unlimited upside. When gold prices rise, WPM still pays a set price. The company reaps higher profits and so do its shareholders.

Second is limited downside. WPM is not on the hook for any additional costs. It is immune to the variable costs and risks associated with running a mine.

Gold streamers have historically done great when stock markets turn volatile. For this reasons, I highly recommend adding WPM to your portfolio before the market goes south.

Get one of the world’s most widely read investment newsletters… free

Sharp macroeconomic analysis, big market calls, and shrewd predictions are all in a week’s work for visionary thinker and acclaimed financial expert John Mauldin. Since 2001, investors have turned to his Thoughts from the Frontline to be informed about what’s really going on in the economy. Join hundreds of thousands of readers, and get it free in your inbox every week.


© 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