Is A DOW Dump Coming? - Mike Swanson (09/26/2014)
At the very beginning of this month I did a podcast with David Skarica on 9/05/2014 in which we expressed the opinion that a stock market correction would begin before the end of the month.
The reason was very simple - the market had rallied in August much like it did in December of last year by going straight up in three weeks and now had gotten into the same position that it started the year in - it was extremely overbought and bullish sentiment was off the charts.
In fact the sentiment was so crazy that this podcast provoked more angry emails than any podcast I had ever done on this website before. I got dozens of emails telling me that the market was bullish and that I was stupid to even suggest that it could pullback.
I took this as a reflection of how manic people are now about the US stock market.
I followed that up with a statement that people should wait for a dip to buy and that created more anger than even the warning of a correction.
The masses are all-in this market and have formed themselves into a fanatical and dangerous heard.
They turn to websites like Yahoo Finance to be told what they want to hear by people like Jeff Macke. Or they watch CNBC's bubble girl. And some with a lot of money pay investment advisors big fees to put their money in funds and then tell them that their funds are going up forever for them.
And if you have watched CNBC or Yahoo Finance videos this month you probably have seen some of the "experts" even make the statement that a correction can't happen again this year for the US stock market.
Now in this first podcast of September I also said that I thought gold would drop and make a bottom this month.
I thought that because gold was already pulling back from a July high.
I had no idea that it was going to drop as much as it did though and have not yet seen signs that the next rally is about to start for it, but I'm watching it closely on a day by day basis.
As for the US stock market I thought it was going to top out around the middle of the month so it took an extra week to do it then I had originally thought it would too.
You cannot predict how things will exactly play out, but you can get a good idea.
Take a look at this:
I've circled two of the recent tops in the DOW this year. They started with a hard break like we saw yesterday. Then there was a weak bounce and another drop that took it down to it's 200-day moving averages.
It seems like something similar is going to play out.
Notice too that last Friday the DOW had a bit of a key reversal day to mark a top.
Now I do not think the market is about to crash and if you are looking to buy on a dip then you are getting the opportunity you have been looking for.
I will be on the look out for that for you.
The point of this email is to tell you that if you want to buy then you should wait a little more a dip and don't get trapped by a weak bounce.
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