Home
Mike Swanson's picture

Stock Market Crash? No You Buy Not Sell Now - Mike Swanson (10/29/09)

Submitted by Mike Swanson on Thu, 2009-10-29 08:50.

Yesterday we saw all three market averages fall hard after six days of selling. In fact the S&P 500 has fallen over 6% from its recent high and managed to close Wednesday right below its 50-day moving average. A few people in fact have been saying the market is about to totally crash, with Nouriel Roubini "warning of a reverse dollar carry trade event that would cause another "financial crisis."

Art Cashin also got on this message on Tuesday telling CNBC that we could see the dollar explode in value in a "scramble to cover their shorts in the dollar," that would lead to "a kind of chain reaction and that could lead to a bit more than a 10 percent pullback."

However, I'm not scared. Remember back in late August Cashin also was saying we could have a Fall crash because of an unspecified international event like a new war or terrorist attack - a statement that was really bizarre - but was just bearish talk to justify selling out of the market.

I'm not worried, because I think the market likely bottomed yesterday. Over the past seven years we've several corrections in this bull market and the bull market of 2003-2007 and several big downdrafts in the bear market of 2007-2009. All of these drops would end in a panic washout in which we saw the VIX spike up 10% in a day, the put/call ratio close above one, and the ratio of sell orders to buy orders on the NYSE and Nasdaq reach the 9:1 level.

After days like that the market would reverse within two trading sessions and go higher. Last year that would lead to big bear market rallies and in the last bull market and this one the market would be on its highs within weeks - sometimes days. The very day the market bottomed earlier this month we saw a panic washout. And the same thing happened in July too.

What is more the market hit two key support levels which have defined the bottom of this bull market - the 50-day moving average and an uptrend support line that has marked the bottom of its profit channel since March. And when you look at sectors such as gold stocks you see the same thing - a sharp pullback to support.
I show you this in this video:




This article continues with a look at my real portfolio positions, stocks on my watchlist, and things to consider buying right now in the WallStreetWindow Power Investor Members section. If you are a member click here for the whole article.

»


Sign Up Below to My Free Weekly Newsletter

Hello. My name is Mike Swanson. I’m the best-selling author of the book Strategic Stock Trading. In a former life I used to run a hedge fund from 2003 to 2006 that generated a return of over 78% during that time frame. In fact it was ranked in the top 35 out of 5,000 hedge funds in 2005.

After I retired from the hedge fund world I setup this website and blog. If you sign up for my free weekly email list below I’ll send you an update on average about once a week on my views of the current stock market trends and share with you actionable investment ideas.

Now I cannot promise you that every stock I find will go up in value. I can’t promise you endless 100% returns as others claim they do and as all the disclaimers say past performance does not necessarily predict future performance and you can lose all of your money in the stock market.

This is reality.

What I can promise you is my dedication to doing the best I can for you.

You see the key to making money over the long-run in the stock market is to manage your risk. Once you sign up to my newsletter I’ll send you a series of educational videos and writings showing you how I use stop-loss orders to cut any potential losses and how I use my two fold formula system that combines fundamental and technical analysis to pick stocks. My goal is to risk one dollar to try to make at least three dollars in my trades by looking for stocks that are priced cheaply on a valuation basis, have high earnings growth, and have excellent chart patterns.

So join my list below and let me help guide you on your journey in the stock market.