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Selling continues towards August lows

Chinese banks saving the market

An interesting parallel to save the market.

This market is a rip for dividend investors and a nightmare for traders. All over the internet we see traders expecting bottom and bullish reversal. It is not happening and more selling is coming every day.

Pundits blame oil and China. I blame slowing economy, gloomy economic outlook, worsening earnings, coming deflation and recession around the corner. On top of that I blame FED’s mishandling of the problem since 2009. I have always criticized the policy of “too big to fail”. I disagreed with pouring millions to GM, issuing $600 dollar check to everybody, saving big banks, printing cheap money, etc. If the money was used properly I wouldn’t have problem with such approach. But stuffing money into economy where it was used to artificially boost earnings by buy backs, or invested in the stock market rather than used for economic growth was a bad idea from day one.

 

 

I expected a bounce to approx. 1960 level, to 1990 or 2000 at most. It looks like, we had a lot shallower bounce only today, just to 1953.6 and then selling resumed. And it was a free fall.

Expect more selling to come. I hope I am wrong, but now we most likely will go to 1830 level which is an August bottom. If we do not bounce at that level, then more selling will come. I started to believe that this market can really go all the way down to 1550, which is the top of the end of 2007 before the market crashed in 2008.

Do not panic if you are a dividend investor. Invest diligently even if the market crashes. Reinvest dividends and lower your cost base by investing during this selloff time. If you are a trader, short the market every time it rallies hard. I am also selling bounce rallies but they can be dangerous so watch them carefully.

Stay safe and preserve capital.
 





2 responses to “Selling continues towards August lows”

  1. Paul N says:

    Amen.

    Totally agree with your blame assessment.

    Not many seem too. I’m convinced we are lied to as to the cause, simply because if the FED admitted they were wrong, it could create worse panic in the markets and to jobs and spending confidence. So they cheer-lead and make up reasons and tell us how wonderful the recovery is. Particularly the one that everything thing is the fault of the wealthy, the greedy bankers, and wall street types. There is no debt level that is too high, and it’s not an important issue apparently. It’s just currency and the tree in the backyard always grows more without any negative affects to the economy.

    I’ll take this time early in the year to say thanks for all your work you put in this blog. I don’t post a lot but I like reading about your love/hate relationship with leveraged investing. I’ll stick to more traditional investments. I think there are just too many surprise unknowns out there since 2008 that can railroad what technically should be a sure bet. Also if people are manipulating important facts in the market, how can you expect to apply logical methods when taking a position?

    • Martin says:

      Hi Paul,

      yes you are right. I also believe we are being lied to to cover up the mess politicians make. That’s why I strongly believe and support that economy should be as independent as possible and politicians and government should stay away. But that’s utopia in today’s world. At least America has the best chances to have as free market as possible.

      Although politicians and all sorts of lobbies are influencing the market and economy it also has been that way since day one. Just reading memoirs by Jesse Livermore, the best stock trader ever, he manipulated the market heavily. He moved prices the way he wanted, he was a true pump and dump trader. Yes at that time it was completely legal and also possible as the stock market wasn’t that big and you didn’t need tons of money to manipulate the market as you would need today.

      Yet I see many people complain about it and cry. I just believe deal with it. Learn how you can take advantage of it! That’s what I am trying to do. Many say this market is rigged. Who cares? If it is and you learn how to navigate in it and trade it, you will make money!

      Thanks for stopping by and reading! I agree that options trading may be risky and not for everybody so if you do not feel comfortable, then stay away. Last year was my biggest blow and as I read other traders, it is fairly normal in this type of trading. So I have to yet learn losing money :)

      Cheers!
      Martin

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