There is blood in the streets for the second day in a row.
This is sending people into a frenzy. They are panicking which is only making the situation worse. The fact that nobody knows what is going to happen with the coronavirus is sending shockwaves through the markets.
Is this accurate?
If we delve into things, we know a few tidbits that are worthy to keep in mind.
To start, the markets detest uncertainty. When investors are uncertain, they take their ball and go home. Sitting on the sidelines, in cash, is usually a good idea. Hence why we see a lot of selling.
Another thing is that the market is looking at how guidance is going to be affected. Some companies already have told the Street to totally ignore what they said. It is no longer valid. This creates even more certainty.
The final piece is that, while swift in pace, the market is still not far from the all time highs. We are probably sitting about 7%-8% from the peak. This is a normal pullback after such a run up.
It is good to remember the media likes to sensationalize things. This is why politics gets so much attention. It is nothing more than a crap tossing contest. The end of the world is near.
When we remove emotion for the equation, we see that this happened a few times over the last 10 years. This bull run is historic and will come to an end at some point. However, each time the "end was near", the market rallied. Buying the dip was a successful strategy over the past decade.
Will it be the same this time. It is impossible to know. The buy the dip is a wonderful strategy until that one time when the trend reverses and we do find the bear in charge.
For this reason, it is always best to be agile near market tops. There is a good chance they break through to new highs. There problem is there is also a chance the market reverses course. Unfortunately, things tend to go down quicker than they go up.
Like bear markets, bulls tend to head to the sidelines too. This market is not going to keep on going forever. However, while the financial media is ready to throw in the towel, it is best to keep in mind where we are standing. The price is reverting back to where it was last fall. This is far from a 30% or 35% correction.
Chartists will tell you that until the trend is broken, it remains in place. This is a rather unemotional way of looking at things. Nevertheless, it is valid advice in times like this.
As always, this is not financial advice.
If you found this article informative, please give an upvote and resteem.
Posted via Steemleo
