What Yesterday's Stock Market Drop Means - Mike Swanson (03/26/2015)
There are moments when everything changes in the stock market. The market has been in a stage three topping phase now since last July when the internals began to breakdown. Stage three topping markets lead to a new bear market and when the topping phase comes to an end there is usually a very violent correction on high volume.
Yesterday there was a big point drop down, but the VIX only went up a little and the ratio of down to sell volume on the exchange was around 80%. You need to see that at 90% to see panic there.
So there was no real panic selling yesterday despite the size of the drop.
That means yesterday was not the low as most corrections and important market drops end in a bout of panic selling.
It looks like we are going to see the markets go through the long-term moving averages before this drop is over, even if it ends up going green today or tomorrow.
That is important, because when bear markets start you get a drop down and through the long-term moving averages and then a rally back up to them with extremely weak participation.
That seems to be what we are going to see ahead of us now. You need to watch that to see whether we go into a bear market or whether you should just continue to believe the bubble bulls who say valuations do no matter and that the Fed will make the stock market go up forever.
And when the bear comes it means everything is going to change and most people are simply going to fail to adapt and lose money.
What is sad is that the financial media is not helping people at all.
Here is "Fast Money" last night telling people to buy into garbage biotech stocks after yesterday's sell-off.
Biotech was the final momo sector in the market and most of the stocks in it are pure garbage.
DO NOT BUY THESE STOCKS.
And here is another CNBC talking head telling people to take on more risk!
On March 8, 2015 I sent a report to my private Power Investor group warning them of financial chaos in the markets and telling them that I was taking drastic action in my own portfolio and trading accounts as a result.
I could not release this information to the public, because it was for the private group only.
This weekend I am going to put together a series of videos for the private group about how to prepare for a bear market and how to actually see it as an opportunity and not something to be afraid of.
I am likely to release these videos in some form to the general public.
I know most people do not want to even think about preparing for a bear market and just want the hype and non-stop stock picks that someone like Jim Cramer can feed them.
I know almost no one one will listen when everyone on TV tells them not to worry and to buy more.
But if the release of this information can help just one person it will be worth it.
I have many people who attack me for giving warnings about the US stock market since last summer.
You can even see some of the attacks on this blog on my own website from some people, but I will not stop fighting for you. Some of these people accuse me of warning about the market as some way to try to get people to sign up to my Power Investor private group.
Well, no one can join it now so that is clearly not what I am doing here in this post.
Also believe me it is a lot easier to sell subscriptions to a trading service that is bullish on the stock market and gives people the constant picks they crave so it is actually the opposite.
Being negative on the market provokes anger and most of the active traders are gambling addicts who just want picks so telling people to be careful and take LESS risk is akin to walking into a casino and telling people to stop playing the slot machines, because they will not win.
Try doing that and see how many people listen to you.
There is a reason why record margin debt levels got built up in this market.
But there are a few people more interested in being a wise investor and not just gambling it up for the action.
We are heading for times not to be afraid of, but to see as an opportunity. Imagine if you could turn the clock back to 2007 or 2000 at the start of a big new cycle and understood what was going to come.
I did an earlier interview this week on the Scott Horton Show about investing and the markets. To listen go here.
I also did a weekend update on gold. If you missed that go here.
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