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Post by xray on Apr 24, 2022 14:40:15 GMT
Home Personal Finance Spending & Saving ‘Waiting for the perfect moment may not be the best strategy’: 3 things investors should do right now as stocks tumble (again) Last Updated: April 22, 2022 at 4:33 p.m. ET First Published: Jan. 24, 2022 at 12:06 p.m. ET By Jacob PassyFollow
Financial experts share their top tips for investors amid the market downturn It’s Freaky Friday on Wall Street for investors.
The latest tumble in stocks is, in many ways, a replay of what investors have seen with the Dow Jones Industrial Average DJIA, -2.82%, the S&P 500 SPX, -2.77% and Nasdaq Composite COMP, -2.55% in recent months — another major disruption to global stock markets.
U.S. stock markets are sharply down on Friday. The latest stock-market turmoil has come as markets have attempted to recalibrate amid policy changes at the Federal Reserve, record-high levels of inflation.
Investors are spooked by hawkish comments on interest rates by Federal Reserve Chairman Jerome Powell a day earlier, in addition to a fresh batch of corporate earnings that largely disappointed.
Powell told an International Monetary Fund panel on Thursday that tempering inflation is “absolutely essential.” On the prospect of the Fed’s next rate hike, he added, “I would say 50 basis points will be on the table for the May meeting.”
Financial experts advise staying cool. Russia’s invasion of Ukraine has also rattled global markets. As Pepperstone’s head of research, Chris Weston, recently wrote, “Trading in a headline-driven market is not for everyone, it requires a dedication to being in front of the screens, an understanding of what is noise and what is signal and an ability to keep emotions in check.”
“Volatility and corrections are a normal part of investing in the markets,” added Greg McBride, chief financial analyst at Bankrate.com. “With interest rates poised to rise this year and the Fed tightening what has been very loose accommodation for the economy and markets, the returns won’t come as easy as they have in the past 18 months or so,” he added.
MarketWatch polled financial experts to see what advice they had for Americans nervously checking the status of the IRAs and Robinhood HOOD, -1.72% accounts. Here are their top tips on what to do in this latest downturn:
Take a lesson from March 2020
The most important advice, according to McBride, is literally to do nothing, and don’t panic. And here’s far from the only financial expert to suggest that.
“Typically in situations where the stock market is in a slump or where it’s behaving erratically, the best course of action is often to just leave your money where it’s at,” said Jacob Channel, senior economic analyst at LendingTree TREE, -5.02%.
Never sell in a loss. For people who are invested in index funds or stable companies, in all likelihood, their investments will rebound.
‘The best course of action is often to just leave your money where it’s at.’ — Jacob Channel, senior economic analyst at LendingTree Don’t believe him? Recent history should offer some comfort. The markets fell sharply at the start of the COVID-19 pandemic amid fears of a prolonged recession. They didn’t stay low for long, though.
“Following that sell-off, the market rebounded spectacularly and the S&P 500 is currently sitting at a near record high — even when taking into account its recent decline,” Channel said.
Review your investment plan
For most investors, the money they have in the market — either through retirement accounts or individual investments — is intended for long-term purposes. So short-term fluctuations shouldn’t change one’s strategy a whole lot.
Still, financial experts said this is a good time to review things to make sure your money is working for you. Multiple financial planners suggested rebalancing your portfolio. “A market downturn is a great opportunity to look at your investments to see if they still reflect your target allocation,” said David Haas, president of Cereus Financial Advisors in New Jersey. It’s natural to see your portfolio allocation drift when stocks are falling and bonds are rising. Getting back on target is key. Doing this means you’ll be selling what’s high and buying what’s low, said Mark Ziety, executive director of WisMed Financial, an advisory firm based in Wisconsin.
Similarly, now is a good time to review the diversity of one’s portfolio. Are you too geared toward growth funds? Do you have exposure to emerging markets?
Now might also be the time to do a Roth conversion, if that was something you were interested in, Ziety said. “When markets are down, more shares can be converted from pretax to tax free for the same tax cost,” he noted.
Put your cash to work
A common aphorism among financial whizzes is to buy the dip. In other words, think of the stock market being discounted right now.
“Depending on your age and time horizon, this may be a time to buy into the market while it is on sale,” said Charles B. Sachs, director of planning and chief compliance officer at Kaufman Rossin Wealth, a national accounting and investment advisory firm.
On the upside, there is no sign of panic selling activity, despite the stock market’s biggest drop off in seven weeks on Friday, according to the Arms Index that tracks market internals.
If you have extra money that you can invest, do not sweat the timing too much.
“You likely won’t catch the market at its best rock-bottom price, so if you want to invest during a downturn, waiting for the ‘perfect moment’ may not be the best strategy,” said Alana Benson, investing spokesperson at personal-finance website NerdWallet.
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Comment: Something to think about....
Live Long and Prosper....
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Post by Deleted on Apr 24, 2022 15:51:47 GMT
"On the upside, there is no sign of panic selling activity, despite the stock market’s biggest drop off in seven weeks on Friday, according to the Arms Index that tracks market internals."
Doesn't it take capitulation to signal a bottom? So we're not there yet.
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Post by uncleharley on Apr 24, 2022 16:14:54 GMT
Capitulation is one sign of a bottom. Some bottoms are formed from exhaustion when the market just sort of tires of going down. rolls over, & begins to go up. Most bottoms are tested before they trend up in earnest.
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Post by Norbert on Apr 24, 2022 16:16:37 GMT
This chart is for LC Growth, but many other charts are similar. The market is testing early year lows and sits at an important level of support. Will we break through support and go lower during the coming weeks and months? My personal opinion is "Yes", we will see lower prices. I don't see this as a buying opportunity yet. The post 2020 Covid crash rally was built on massive monetary & fiscal stimulus that drove rates to zero. That's being unwound now and it will take time. Housing prices may cool thanks to rapidly rising mortgage rates, making people feel poorer. Bonds will start to have appeal as interest payments exceed stock dividends. Politically, I have low confidence that the current administration will take steps to ease oil & gas prices; and I worry about its ability to deal with growing geopolitical challenges. Just my two cents. N.
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Post by uncleharley on Apr 24, 2022 16:26:14 GMT
The velocity of the downward momentum is just too strong for a turn here. Technically a retest of the 2020 bottom is an open question.
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Post by Chahta on Apr 24, 2022 17:38:37 GMT
I have an order in for Monday. It is to sell the only equity fund I own in my taxable account. The sole purpose of that fund is to generate CGs. I have less than 1 month ago but still have a nice gain. I do not see an upside for B&H the fund now. If nothing else I will reset my cost basis since I will pay 0% CG tax on this transaction. I suppose this is my capitulation.
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Post by richardsok on Apr 24, 2022 18:42:29 GMT
After that recent thread begun by Mike discussing his position in bond funds on recommendation from his FA, I did some fiddling to come up with a technical Buy/Sell set-up that would throw off as FEW trade signals as possible, yet still be valid and more timely than 50- 100- or 200 day crossovers and the like.
Among the stocks & funds I follow, it is showing a host of "AVOIDS" but bullish on SARK RALS RJA BCI NRGX TKC FPI NGLB PBR TYG TBF. ( X, your CAPL is beating the rap. I lost track of it while I was selling and moving out of my home. )
Headlines with words like "spooked" and "panic" are offensive, IMO. No one is going to guilt-shame me for side-stepping a bear market. I even had to move some money out of Merrill Lynch when their back office complained the other day I had too few assets and too much cash. (Had to reduce my cash/invested assets ratio. Annoying? You bet.) If I'm playing my game right, I have already baked in my "sell point" any time I buy a low-volatility asset.
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Post by anitya on Apr 24, 2022 22:29:49 GMT
"Bonds will start to have appeal as interest payments exceed stock dividends."
Agree.
If we do not consider the pie in the sky (aka, dividend growth), dividends are already lower than interest rates (SPY div yield is 1.3%* vs 10 yr Treasury is 2.9% and trending to 3-3.5%), which I am afraid could put a damper on the SPY. Interestingly, as SPY falls, 10 yr Treasury yield might fall too as Treasuries start acting as a ballast but that in of itself might not help SPY recover.
* Yahoo finance and M* 12-month yield and SEC yield
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Post by xray on Apr 25, 2022 19:02:28 GMT
Home Markets Need to Know Need to Know The stock market selloff still has another 20% to go, says the godfather of liquidity Last Updated: April 25, 2022 at 7:46 a.m. ET First Published: April 25, 2022 at 6:56 a.m. ET By Steve GoldsteinFollow
Critical information for the U.S. trading day. Where has the liquidity gone?
As the meat of earnings season begins, it’s worth noting what investors have learned so far. The short version is, apart from a few isolated companies (cough, Netflix, cough), not a whole lot: the projected rise in S&P 500 earnings per share this year stands at 8.9%, compared with 8.1% at end of March, according to S&P Global Market Intelligence.
But even as expectations toward earnings have improved, the market has struggled, with the S&P 500 SPX, 0.06% down 6% this month so far. So what’s going on?
Well, reserves at the Fed fell by $460 billion last week, which according to Citigroup was the biggest weekly drop ever. So let’s hear what that means from Michael Howell, dubbed the godfather of global liquidity, and the chief executive of CrossBorder Capital, a boutique he formed in 1996 after heading the research teams at Baring Securities and Salomon Brothers. Howell explained to Jack Farley of Blockworks Macro that, by global liquidity as opposed to market liquidity, he means the ability to change investment positions relatively easily. “If you put more liquidity into a financial system, what’s happening is you are decreasing systemic risks, because it’s much easier for any particular entity to get funding, and if funding is easy, people will move along the risk curve into higher risk instruments,” he said.
The central banks, through monetary operations, control a large part of liquidity. He also monitors the actions of commercial banks, shadow banks, big corporations such as Microsoft and Alphabet and cross-border investors. And in response to surging inflation, some 95% of central banks around the world are tightening. The Federal Reserve, in the minutes from the last Federal Open Market Committee meeting, outlined a plan to reduce its balance sheet by some $2 trillion.
Howell says a normal tightening cycle would lead the S&P 500 down by around 15%, if a recession is thrown on top that’s a 30% drop, and if there’s a banking crisis on top of that, there’s a 50% slide. “I don’t think we’re going to get the third, I think we’re getting more than the first, so I’m plumbing for the middle which is about a 30% correction from the peak to the low,” he said.
Since there’s already about 10% of the decline from the peak, Howell says there’s another 20% drop to come.
“The point to remember about the financial system is that, contrary to what the economics profession says and the economic textbooks spell out, the financial system is much less a new financial system than it is in reality a refinancing system,” says Howell. With some $300 trillion of global debt and the average maturity about five years, some $60 trillion needs to refinanced every year.
That declining liquidity has already been seen with the collapse in the Japanese yen USDJPY, -0.45%, soaring Treasury bond yields, and spiking commodity prices. The increased volatility makes it more difficult for people to borrow against that collateral as lenders will require more margin. Howell says his index of liquidity is on the verge of entering the “turbulence investment zone”
Howell also said that market leadership — utilities and brand names outperforming cyclicals and techs — and the yield curve are saying that investors want safety and that a recession is increasingly likely.
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Comment: Some of us are standing pat with our current portfolio since we made most of our portfolio changes before the market correction (remain @ 33% cash). Believe that what we have to continually "watch" is what the insiders will be doing (selling or buying signal to what their CFO's are telling them), and what securities are either at a "New Low" or approaching a new low. Have to believe that most of us believe that we currently have the "BETTER" securities in our portfolio's and that what goes down below "VALUE" will go to "BETTER VALUE" in the long term (playing the long game)....
One single opinion of the many I am sure....
Live Long and Prosper....
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Post by richardsok on Apr 26, 2022 2:04:16 GMT
Significant blocks of Rocket Mortgage (RKT) were acquired by its CEO on 4/19. 20 and 21. Practically the only meaningful insider buy I could find.
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Post by xray on Apr 27, 2022 15:37:36 GMT
@haven, uncleharley, Norbert, Chahta, richardsok, anitya, richardsok, I noticed that one of your posts had GLP on your watch list. You might want to review my latest post on GLP on "Buy/Sell & Why".... All of the expected insider activity should is apparently on hold as the market low has yet to be reached (IMHO). I expect a investor will "overshoot" the low's (lower than we will expect) as usual in this type of volatile market. Cash is still needed as a bargain chip. Still looking for the (real) "super" bargains against all of the current market bargains where the market is still declining and being very volatile.... Live Long and Prosper....
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Post by uncleharley on Apr 27, 2022 17:14:30 GMT
We could get a counter trend rally in the major domestic equity indexes here, but it needs more development. Meanwhile I am watching my short positions very closely.
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Post by FD1000 on Apr 28, 2022 12:50:18 GMT
This thread should be under MARKET INSIGHT...anyway. Any time I read about financial "experts" saying "literally to do nothing, and don’t panic." it's kind of funny. If you let them manage your money, they hardly ever take the simple easy way, they use too many funds, tell you they know what to do based on markets. They can't achieve better risk-adjusted returns and lastly, do not give you guarantee or refund their enormous fees when they are wrong or lag. I do agree that most should know their goals, come up with a portfolio based on that, use limited number of fund and hardly do anything but many don't follow it, including me. Looking at my big category ( charts), I keep seeing the same as I did in 01/2022. Value(VTV) is where you want to be. VOO(SP500), VUG(growth), VXUS(international) are all worse. VTV is the only one with higher highs and higher lows in the last 2 months. In the last month VTV fell 5% while the others fell 9-13%. Good chance for a rebound, after a decline like that. Attachments:
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Post by xray on Apr 28, 2022 21:00:46 GMT
In One Chart Here’s how far the S&P 500 has to fall to enter another stock-market correction Last Updated: April 28, 2022 at 7:19 a.m. ET First Published: April 27, 2022 at 1:28 p.m. ET By William WattsFollow A close below 4,168.44 would mark new correction for large-cap benchmark
Stocks finished mostly higher Wednesday as an early bounce fizzled, providing a bit of breathing room for the S&P 500 after it came close to entering its second market correction of 2022. The large-cap benchmark rose 0.2% to close at 4,183.96, after ending Tuesday at 4,175.20 in a tech-led selloff that dragged it down by 2.8%. Stocks have seen volatile day-to-day and intraday swings in recent sessions.
A close at or below 4,168.44 would see the S&P 500 SPX, +2.47% enter a correction, according to Dow Jones Market Data. A correction is defined as a pullback of at least 10% — but nor more than 20% — from a recent peak. A correction is exited after rise of at least 10% from a correction low.
The S&P 500 previously suffered a correction on Feb. 22, when it closed at 4,304.76, down 10.25% from its early January record close. Stocks extended a slide in early March as investors reacted to Russia’s Feb. 24 invasion of Ukraine, which sent oil prices soaring to nearly 14-year highs and stoked geopolitical anxiety.
A closing low of 4,170.70 on March 8 marked the bottom of that move. The S&P 500 exited the correction on March 29, when it finished at 4,631.60, up 11.05% from the March 8 closing low. Exits from correction territory have tended to see the index continue to gain ground in subsequent weeks and months, though not always.
It has been 20 trading days since the S&P 500 exited its previous correction.
Stocks have suffered in April as investors adjusted expectations around the Federal Reserve and the prospect of a series of outsize rate increases and an aggressive wind-down of the central bank’s balance sheet as it attempts to rein in inflation running at its hottest in more than 40 years.
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Comment: Market shows a gain in many stocks today but the ratio is still only 3.5 to 1 positive. In plain English, 25% (minimum) of current our portfolio's should currently be "positive" (to last week's numb3rs) and 75% still trailing in Market Price value. Am looking for 1:1 for acceptable investing signal again. On the plus side, identified four securities that appear (beyond) the bottoming signal. If they continue to follow the current analysis trend, I will be adding shares.... We must keep in mind that the "better securities" in our portfolio's will "JUMP" in MktPrc on any turnaround signal. However, always however's, any further decline in the market will again make the security (temporarily) drop in MktPrc. Securities that go up only a few cents or <$1.00 are considered "ok" but not our hero's that we normally expect them to be in a positive changing market. ...
Live Long and Prosper....
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Post by xray on Apr 29, 2022 19:04:06 GMT
Home Markets Market Extra A rough 4 months for stocks: S&P 500 at risk of booking the worst start to a year since 1942. Here’s what pros say you should do now. Last Updated: April 29, 2022 at 2:43 p.m. ET First Published: April 29, 2022 at 12:42 p.m. ET By Mark DeCambreFollow
It’s shaping up on Wall Street as arguably the worst opening one-third of any year in some eight decades. To say that it has been a perilous stretch for bullish stock investors on Wall Street lately is a bit of an understatement.
Marked by stomach-churning volatility and bruising losses in once-popular technology trades, the S&P 500 is on track for the worst start to a year, through the first four months of 2022, in over 80 years, with the steepest decline in April since at least 2002 contributing to the unsettling, bearish tone.
Don’t miss: What to watch for at Warren Buffett’s ‘Woodstock for Capitalists’ in Omaha on Saturday
If the current, dour complexion of the broad-market S&P 500 SPX, -2.80% holds through Friday’s close, the index, down 11.5% at last check, will register the most unsightly four-month period to start a calendar year since 1942, when it declined 11.85% (see table).
Year First 4 Months % Change 1932 -28.2 1939 -17.3 1941 -12.0 1942 -11.85 1970 -11.5 2022 -11.5 (as of 10:44 a.m. ET) 2020 -9.9 1973 -9.4 1960 -9.2 1962 -8.8 Source: Dow Jones Market Data
The other major equity benchmarks aren’t faring much better. The technology-laden Nasdaq Composite Index COMP, -3.30% is down 19%, which would mark its worst first four months since 1973, and a decline greater than 19.35% would represent the biggest such fall for the Nasdaq Composite since its advent in 1971.
The Dow Jones Industrial Average DJIA, -1.92% is off 7.7% to date in 2022, which would be the worst start to a year for blue chips since the COVID pandemic took hold in the U.S. in 2020, when it declined a whopping 14.69%.
Markets are slumping amid a litany of issues and sentiment that has been shaky, with a key measure of the U.S. economy’s overall health, gross domestic product, shrinking at a 1.4% annual rate in the first quarter, hamstrung by supply-chain bottlenecks and a widening trade deficit, though consumer and business spending were bright spots.
Awful start to 2022 Source: FactSet 2022 April -25 -20 -15 -10 -5 0 5 %
In fact, personal-consumption expenditures, or PCE, the Federal Reserve’s favored measure for reading inflation, increased a seasonally adjusted 1.1% in March from the prior month, the Commerce Department said Friday.
Worries surrounding the invasion by Russia of neighboring Ukraine have been amplifying unease about the health of the global economy, as lingering battles with COVID-19 continue to hamstring parts of the world, notably China.
Out-of-control inflation and a Fed that is eager to stamp it out with higher benchmark interest rates also have been a recipe for ferocious price swings.
However, there are some signs that inflation may be cooling. Overall inflation rose 6.6% in March from a year earlier, an acceleration from February, but the move represented a decline when factoring food and energy costs, with a rise of 5.2% last month from a year earlier, according to the government.
It’s worth noting that, bonds, traditionally perceived as a place of refuge for investors as stocks fall, haven’t offered much comfort. The iShares 20+ Year Treasury Bond ETF TLT, -0.63% is down 19% so far in 2022 as benchmark 10-year Treasury yields TMUBMUSD10Y, 2.876% have climbed rapidly, nearing 3%. Bond prices fall as yields rise.
iShares 20+ Year Treasury Bond ETF Source: FactSet As of April 29, 2:46 p.m. ET 2022 April 115 120 125 130 135 140 145 $150
Need to Know: ‘So bad, it’s good.’ This beleaguered stock market has one big asset on its side, say strategists. Against that backdrop, is the outlook as grim as it has been over the past four months? Baird market strategist Michael Antonelli said clients have been checking in intermittently amid the market tumult. “We continue to remind them that the world is a crazy place, that there is almost never a time when returns are high and risks are low,” he offered. “We also reiterate the fact that holding stocks in a bull market is practice, while holding them in difficult times is the Super Bowl,” he said.
Art Hogan, chief market strategist for National Securities, said that market moments similar to this current downturn test investors’ resolve, referencing the 17th-century Thomas Fuller observation that it’s darkest before the dawn. “We would offer up,” said Hogan, “that we are at or near that darkest place.”
There could be glimmers of light to come, in Hogan’s view, as the market becomes more inured to the Fed’s plan. The Federal Open Market Committee convenes its two-day policy gathering next week, May 3-4, when it is expected to hike rates substantially, possibly delivering an increase to the benchmark federal funds rate, presently in a range between 0.50% and 0.75%, by a half-percentage point or even more.
“Markets sold off in anticipation of the Fed’s first-rate hike in March, only to rally some 10% after the announcement,” Hogan said. “We would not be at all surprised if we see a similar reaction after the May 4th communication, as the Fed policy fact will replace the Fed policy narratives that have been spooking the growth sector. Sell the rumor, buy the news,” the strategist said.
As far as strategies, Hogan said in a Friday research note, he recommends a “diversified equity allocation with a barbell approach with growth exposure on one end and economically sensitive cyclical exposure on the other end.” A barbell strategy refers to an investing approach under which an investor invests across a risk spectrum ranging from higher risk to low risk, in an effort to achieve a more balanced portfolio.
Will the environment be better for stocks next month? Who knows. But sentiment appears to be improving. The final survey of U.S. consumer sentiment in April slipped to 65.2, but that still marked the highest reading in three months and the first improvement so far this year. That could mean more green shoots in May for segments of the economy. The most recent report produced by the University of Michigan reveals that Americans felt better about falling gasoline prices and were more optimistic about the future.
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Live Long and Prosper....
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Post by xray on May 11, 2022 21:43:11 GMT
@haven, uncleharley, Norbert, Chahta, richardsok, anitya, FD1000, Opinion: When is it safe to start buying stocks again? We’re not there yet, but these are the six signs to look forLast Updated: May 11, 2022 at 3:27 p.m. ET First Published: May 11, 2022 at 3:26 p.m. ET By Michael BrushFollow Extreme negativity is only one indicator. Six market professionals explain what they track.Big stock market drawdowns like the current one often end with a selling frenzy, called capitulation. So, you’ll want know how to spot capitulation — a sign that it’s safer to start buying. To find out, I recently checked with several of my favorite market strategists and technicians. They offer the following indicators. In fairness to them, they all look for a combination of confirming signals. “It’s a basket of things, but when they start to pile up, it gives me more confidence,” says Larry McDonald of the Bear Traps Report. In the interest of brevity, however, I cite only one or two signals each. Look for peak negativity among investors Verdict: We are not there yet.
While several investor sentiment opinion polls suggest extreme negativity, you don’t see the same signal when you look at what they are actually doing with their money, says Michael Hartnett, Bank of America’s chief of investment strategy. Since the start of 2021, investors put $1.5 trillion into mutual funds and exchange traded funds. So far, they’ve only taken out around $35 billion. “That is not capitulation,” says Hartnett. For that, he’d like to see $300 billion in withdrawals, particularly if it happened fast. Likewise, stock allocations are at 63% among portfolios in Bank of America’s private client network. For capitulation, we’d need to see that drop to the mid-50% range. “This just isn’t it,” he says. Look for a peak fear index. Verdict: Not there yet.The Chicago Board Options Exchange’s CBOE Volatility Index VIX, -1.30% tracks investor fear, based on positioning in the options market. Higher means more fear. The VIX recently touched 35, but that’s not high enough to signal capitulation, says Bob Doll, chief investment officer at Crossmark Global Investments. He’d like to see moves closer to 40. He also wants to see more stocks hitting the 52-week low list, and more stocks trading below their moving averages. “We have evidence of some capitulation, but probably not enough to call it a significant bottom,” says Doll. Look for a spike in the put/call ratio. Verdict: Not there yet.Investors buy put options when they’re bearish. They buy calls on a bet that stocks will rise. So, the overall put/call ratio tells you how scared investors are. Higher means more fear. Leuthold Group chief investment officer Doug Ramsey calls this his “desert island sentiment indicator.” To smooth out volatility, he tracks a three-day average. Since 2014, capitulation bottoms happened when this ratio moved to 0.85 or higher, as you can see in the chart below from Ramsey. It was recently at around 0.7. So, it’s not there yet. “A heck of a lot of damage has been done. Investors are scared, but not genuinely panicked,” says Ramsey. “I don’t think we are close to a final low.” Look for a spike in the number of stocks getting trashed. Verdict: The low is in — tradable bounce ahead.To identify capitulations, McDonald at the Bear Traps Report tracks how many stocks are down a lot. For what he calls the “classic pukes,” he looks for a sharp contraction in the number of stocks on the New York Stock Exchange (NYSE) above their 200-day moving averages. When this falls into the 20% range, this suggests capitulation. It was recently at 28%. That’s close enough considering the following confirming indicators. McDonald cites the elevated ratio of decliners to advancing issues on NYSE (seven to one), one of the highest levels in the past five years. And the large number of stocks recently hitting new lows on Nasdaq. That was 1,261 on May 9, also near the high for the past five years. The upshot: “There’s a 95% chance we have seen capitulation for a tradable bounce,” concludes McDonald. It could create a 20%-30% upside move. But this will merely be a rally in a sustained bear market that will carry on for a year or two. He cites two reasons. First, most investors are down a lot, and they just want their money back. “The average investor is so torched right now,” says McDonald. “They will sell strength.” Next, the Federal Reserve is going to “break something” with its aggressive rate hikes. Likely candidate: Something in the commercial real estate market. “You have skyscrapers in all the big cities empty, and loans are starting to come due,” says McDonald. “There could be big default cycle.” Look for a high-volume blow-off Verdict: Not there yet.One good sign of capitulation is a “ selling climax” marked by a sharp move down on big volume, says Martin Pring, publisher of the InterMarket Review investment letter and author of “Investment Psychology Explained,” one of my favorite market books. Often this can happen with a big whoosh down in the morning and a recovery, followed by relative calm. So far, we have not seen a high-volume selling climax. Look for a big decline in margin debt Verdict: Not there yet.Jason Goepfert at SentimenTrader likes to see a big reduction in brokerage account margin debt as a sign of capitulation. How big? He looks for a 10% drop year over year. The current decline is just 3% to $799 billion. Goepfert has at least 12 capitulation indicators, and only three suggest we are there. They are: The initial public offering drought; several consecutive weeks of $10 billion equity fund outflows; and extreme lows in investor sentiment surveys. Among other signs, he’d still like to see at least 40% of NYSE stocks at 52-week lows (we are near 30%); fewer than 20% of S&P 500 SPX, -1.65% stocks trading above their 200-day moving averages (currently 31%); and a spike in correlation among stocks in the S&P 500.When investors hate everything, it’s a sure sign they probably can’t get much more bearish. Michael Brush is a columnist for MarketWatch. He publishes the stock newsletter, Brush Up on Stocks. Follow him on Twitter @mbrushstocks. ---------- Live Long and Prosper....
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Post by uncleharley on May 12, 2022 13:51:56 GMT
FWIW; I agree, we are not there yet!
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Post by anitya on May 12, 2022 19:16:20 GMT
uncleharley, Probably a wrong question to ask a trader but what do you see working well after we see a bottom in equities?
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Post by Norbert on May 12, 2022 20:13:57 GMT
Nice last hour recovery for the S&P to hold 3900.
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Post by uncleharley on May 13, 2022 1:58:03 GMT
uncleharley , Probably a wrong question to ask a trader but what do you see working well after we see a bottom in equities? Quality will lead. I do not know what sector, but large cap dividend payers with a long consistent track record will lead from the bottom. Not the NDX 100 which is what I am shorting now.
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Post by anitya on May 13, 2022 4:50:54 GMT
uncleharley , Probably a wrong question to ask a trader but what do you see working well after we see a bottom in equities? Quality will lead. I do not know what sector, but large cap dividend payers with a long consistent track record will lead from the bottom. Not the NDX 100 which is what I am shorting now. Thanks. I will have to re-read how SCHD is put together but that might meet the criteria you described.
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Post by uncleharley on May 13, 2022 12:07:43 GMT
Nice last hour recovery for the S&P to hold 3900. Yes, The strong close is indicative of having reached a support level which should help the major indexes consolidate their losses here before moving lower.
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Post by win1177 on May 13, 2022 13:35:23 GMT
uncleharley , Probably a wrong question to ask a trader but what do you see working well after we see a bottom in equities? Quality will lead. I do not know what sector, but large cap dividend payers with a long consistent track record will lead from the bottom. Not the NDX 100 which is what I am shorting now. I agree, I think “higher quality” companies will recover better when things turn around. They will have the cash flow and profits to continue their growth, and the dividends will provide some cash flow support. Last bad recession (2007-2009), my portfolio only lost about 1/2 what the overall market lost, even though I was about 90% equity. This is mainly due to my holdings being wide moat dividend growth stocks, able to grow earnings and dividends for years on end. This downside protection pays off, IMHO. Win
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Post by richardsok on May 13, 2022 14:34:53 GMT
Quality will lead. I do not know what sector, but large cap dividend payers with a long consistent track record will lead from the bottom. Not the NDX 100 which is what I am shorting now. I agree, I think “higher quality” companies will recover better when things turn around. They will have the cash flow and profits to continue their growth, and the dividends will provide some cash flow support. Last bad recession (2007-2009), my portfolio only lost about 1/2 what the overall market lost, even though I was about 90% equity. This is mainly due to my holdings being wide moat dividend growth stocks, able to grow earnings and dividends for years on end. This downside protection pays off, IMHO. Win On the notion stocks cannot meaningfully rally until the market has a glimmer that the size and pace of rate increases will be slowing, I expect to focus most closely on FPF, PGP for intended future biggest positions. I also have my eye on HDGE, USOI, UUP/UDN PMF (muni) BCI & RJA (commonds) GER pipelines, PDO/PDI/PTY. ALSO: KNOP IEP CAPL HGLB DSL DFP CODI QYLD SBLK PFLT NRGX ING ETHE FTF GSBD But list can be modified any time. Right now my biggest position is raw cash. As usual .... FWIW.
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Post by Norbert on May 13, 2022 14:50:24 GMT
Nice last hour recovery for the S&P to hold 3900. Yes, The strong close is indicative of having reached a support level which should help the major indexes consolidate their losses here before moving lower. We're short term oversold and have touched a decent support level. You never know what's around the corner, but I also think this will be a short-term move up. There's more market froth to probably work off. On the other hand, many foreign indexes have already crashed hard. If we see inflation rates declining, more buyers might come in.
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Post by win1177 on May 13, 2022 15:07:41 GMT
Yes, The strong close is indicative of having reached a support level which should help the major indexes consolidate their losses here before moving lower. We're short term oversold and have touched a decent support level. You never know what's around the corner, but I also think this will be a short-term move up. There's more market froth to probably work off. On the other hand, many foreign indexes have already crashed hard. If we see inflation rates declining, more buyers might come in. The BIG question is whether this is a short term “respite” from the pain, or a true “bottom”. I’m not convinced, so I’m still sitting on about 15% cash. The rest of my holdings (all stock) are long term holds, so I’m not touching them. I plan on using some of that cash to repurchase muni bond funds, when rates are higher. But not all of it. My reading of several articles early this AM (on SA) is that the overall market is now closer to “fair value”, based on P/E’s, as well as many other valuation methods. But I wonder if the market won’t really “recover” until we see signs inflation is coming down. Win
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Post by uncleharley on May 13, 2022 16:58:54 GMT
The Fed will tell us when they are done. Don't fight the Fed. BTW; The early lunch crowd bought into the rally. That has been a very reliable contrarian indicator on turns for me.
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Post by xray on May 13, 2022 22:12:48 GMT
richardsok, CAPL ---------- May be some trouble with CAPL. CAPL had made a previous announcement (4/18) that they would post their Qtrly report on 5/9. Haven't seen it. There is a possibility that they didn't want to post it in a declining market. I did a sell/buyback @ 19.22 to get some further protection.... For what it is worth.... Live Long and Prosper....
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Post by Norbert on May 14, 2022 6:04:30 GMT
win1177"My reading of several articles early this AM (on SA) is that the overall market is now closer to “fair value”, based on P/E’s, as well as many other valuation methods ..." There's an interesting collection of market valuation perspectives here: www.currentmarketvaluation.com/Conclusion : we're getting closer to historical averages of certain valuation models, but the US stock market isn't "cheap" yet. Much will depend on future interest rates and therefore on inflation trends. "Easy money" had pushed stock, bond, and RE prices to lofty heights; presently liquidity is being withdrawn from the market. I think the correction has further to run. There remains the risk of a credit crisis as asset prices decline and commodities prices rise. I'd like to be wrong, but fear that we're entering a 1970s style Bear Market.
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Post by anitya on May 14, 2022 19:27:20 GMT
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