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Market Crash: Missing the Bounce

Posted by kdadmin on September 1st, 2015.

Market Crash: Missing the Bounce

While the S&P500 based SPY bounced up nicely on Thursday, recovering about 5% of its 12% loss against its high, that rally has failed.Since then, the market is down another 3.5% through overnight trading. So, lest you think the market has “recovered,” it’s nowhere near such a thing.

Let’s put this into terms of real money …

Imagine that you had an account that was invested in SPY with the following values at the market high in late May, 2015. This is likely how you would have fared in the recent market crash.

  1. $300,000 start value.
    1. – $37,000: Loss over the summer through last Tuesday.
    2. + $15,000: Gain on Thursday’s bounce.
    3. – $11,000: Loss in overnight trading through today.
    4. – $33,000: Loss in three months. That’s 11%!
  2. $2,000,000 start value.
    1. – $247,000: Loss over the summer through last Tuesday.
    2. + $100,000: Gain on Thursday’s bounce.
    3. – $74,000: Loss in overnight trading through today.
    4. – $221,000: Loss in three months. Again, that’s 11%.

Now, imagine you had been sitting in cash (CMR)since the market’s May high and could have avoided losing this money? How much would that investment advice have been worth to you?

My point here is simple. Markets have cycles. And, those cycles have cycles. Why do you think that on Thursday, at the top of last week’s bounce, I made the following comment in my Market Crash: Daddy’s Gotta Bounce post?

“p.s. If you’re still heavy into the equity (stock) side of the market, this stock market bounce is your lifeline. I suggest you click the button below to “phone a friend.”

Hopefully, if you were in stocks, you used that lifetime, phoned a friend, took their advice, and got out. If you didn’t, and had $300,000, ignoring your friend just cost you $11,000. How much would you have paid to avoid that?

Look, I’m not trying to be harsh. Well, maybe a little. But the problem with our “always on” media is that it overloads investors. Pretty soon all the numbers just blend together and people lose sight of the point of investing. Which is, TO MAKE MONEY and AVOID LOSING MONEY.

So, again, if China’s manufacturing data, Europe’s slump, England’s sell off after yesterday’s bank holiday, tepid global economic numbers, and a looming, traditionally difficult, October earnings season isn’t enough to give you pause about the stock market, I don’t know what is. But, I do know that if we slip below Tuesday’s low, it’s gonna get ugly.

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