Tuesday, September 02, 2014 12:42pm
North Adams, MA now: 82 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
SIGN IN | REGISTER NOW   

Home About Archives RSS Feed
@theMarket: Now What?
By: Bill Schmick On: 06:45PM / Friday August 05, 2011
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

Unless you have been living in a vacuum, you are keenly aware of the stock market's freefall. Panic is in the air and rumors are swirling around the Street's trading floors. It is time for investors to step back and take a breath.

If you are worrying about your retirement accounts, don't. This is not 2008-2009. Much of what is going on in the markets is a result of conjecture, not facts. No one knows if we are going into another recession. No one knows if Italy is going to go bankrupt, no one knows the future. At most, we can only make educated guesses.

Let me first admit that I was definitely wrong last week when I posed the question "Buy or Sell" in my column. I advised readers to hold onto their investments. Like many others, I was expecting a rally in stocks after the successful passage of a debt-limit increase. Even though I expressed my deep concerns over the weakening of the economy, I was caught like everyone else going the wrong way when the markets dropped through the floor. That said, I believe it is too late to sell and, if I do, I will wait first for a bounce.

Selling a market already down 12 percent in 10 out of 11 days is not a smart move. We are close to, if not already in, that zone of capitulation where panic takes over and investors want out at any price. Thursday was over a 95/5 day during which 95 stocks were sold for every five purchased. The New York Stock Exchange Index is so oversold that it registers a minus-2 standard deviation (SD). These are all signs of a near-term bottom.

My friend John Roque, technical strategist over at WJP Capital Group, indicates that when stocks are this oversold, a relief rally is not far behind. In 100 percent of the cases over the last 30 years where a minus-2 SD occurred, the markets have bounced anywhere from 2 percent to over 10 percent within two weeks. Three months later, the same markets gained 3.6 percent to 34 percent. So the odds are in your favor that selling now would be a losing proposition.

"OK, I wait for a bounce," says a client from Becket, "then what?"

That depends. Many times after a relief rally (sometimes called a dead cat bounce) the markets return to, at, or near the lows before moving higher. At other times, there is a week or two of pause before markets resume an upward climb. Last year, the S&P 500 Index lost almost 18 percent and then rallied straight up with no retest. It could happen again but we will need to get the bounce first before guessing at its durability.

The reason this correction feels so different from last year's is the compressed nature of the decline. What took four months to accomplish in 2010 has taken only 11 days thus far this year. In some ways, a short sharp correction is better than a drawn out death by a thousand cuts kind of correction, although both are painful.

So here's my game plan: stay invested, wait for the bounce, when it occurs sell some of your most aggressive investments and see what happens. If we retrace, buy at or close to the bottom. If we continue to climb, the worst that can happen is you miss a few percentage points of gains. But remember, preserving principle is your No. 1 concern. Profits should come second. 

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or e-mail him at wschmick@fairpoint.net . Visit www.afewdollarsmore.com for more of Bill's insights.



Tags: crash, bottom, dead cat bounce      
News Headlines
College, Criminal Processes for Sexual Assault Cases Not in Conflict
Pittsfield Board Approves Expansion For Pediatric Devleopment Center
MCLA Women's Soccer Falls to Albertus Magnus
Larabee, Giorgi Honored With 'Frankie' Awards
Former Finance Director Returns to Williamstown as Pastor
Armory Takes Lead in Torchia Softball League Final
Legislative Q&A: State Rep. William 'Smitty' Pignatelli
MCLA Women's Soccer Ties; Tennis, Volleyball, Men's Soccer Win
Holiday Hours: Labor Day
Clarksburg Weighing Bridge Plans, Preparing Special Town Meeting
Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (143)
Independent Investor (194)
Archives:
August 2014 (7)
July 2014 (2)
June 2014 (6)
May 2014 (9)
April 2014 (8)
March 2014 (6)
February 2014 (6)
January 2014 (7)
December 2013 (8)
November 2013 (7)
October 2013 (6)
September 2013 (6)
Tags:
Fed Currency Stimulus Economy Jobs Stocks Selloff Fiscal Cliff Deficit Congress Debt Commodities Federal Reserve Pullback Euro Debt Ceiling Markets Retirement Japan Rally Europe Oil Housing Banks Recession Energy Stock Market Taxes Election Metals Bailout Crisis Greece Europe Interest Rates
Popular Entries:
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Don't Fight the Fed
The Independent Investor: Does Cash Mean Currencies?
@theMarket: QE II Supports the Markets
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
Recent Entries:
@theMarket: What's Up With Bonds?
The Independent Investor: Baby Boomers and Retiremen
@theMarket: Labor on Their Mind
The Independent Investor: Financing ISIS
@theMarket: Geopolitical Risk Trumps Economic Growth
The Independent Investor: Beware the Russian Bear
The Independent Investor: Why Some Corporations Are Leaving America
The Independent Investor: How Much Is Too Much to Spend in Retirement?
The Independent Investor: The Fed Turns Off the Spigot
The Independent Investor: Should You Pay Off Mortgage Before Retiring?


View All
Friday Soccer Scrimfest
Friday afternoon girls soccer 'Scrimfest' at Drury High...
Pignatelli Campaign Kickoff...
State Rep. William "Smitty" Pignatelli held a kick off...
Down Street Art
People flooded main street to see the new art installations...
Western Mass Beer Fest 2014
Hundreds turned out for the 9th annual Western Mass Beer...
High School Soccer
High School soccer practice got under way on Thursday.
Motorama
Hundreds of cars, trucks, motorcycles, snowmobiles and...
Chamber Nite @MountainOne
A who's who was at the MountainOne-hosted Berkshire Chamber...
Third Thursday Aug. 21, 2014
The August Third Thursday event in Pittsfield included a...
High School Football
High School football practice got under way on Monday.
Giorgi League Semis: B&B vs...
Burr and Burton held a steady lead over Bennington, Vt.'s,...
Giorgi League Semis: Drury vs...
Alex Heck scored 19 points to lead the Drury boys...
Mill Children Opening
The 5 Hoosac Street Gallery held its grand opening Friday...
Downtown Celebration 2014
North Adams held its annual street fair on Main Street on...
Worcester Bravehearts vs...
Key at bat helps the Worcester Bravehearts defeat the...
9th Annual Rock, Rattle &...
This year's theme is "Living in Harmony, Fulfilling Our...
Softball Series: Berkshire...
Friday Soccer Scrimfest
Friday afternoon girls soccer 'Scrimfest' at Drury High...
Pignatelli Campaign Kickoff...
State Rep. William "Smitty" Pignatelli held a kick off...
Down Street Art
People flooded main street to see the new art installations...
Western Mass Beer Fest 2014
Hundreds turned out for the 9th annual Western Mass Beer...
High School Soccer
High School soccer practice got under way on Thursday.
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings
Advertise | Recommend This Page | Help Contact Us | Privacy Policy| User Agreement
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2000 Boxcar Media LLC - All rights reserved