Market Crash

[impala096]

The two lines in the chart below have a perfect correlation (even though the slopes of the lines are different).



I made a very simple statement:

"The current DJIA pattern correlates with some historic crashes."

This is 100% accurate. I wasn't trying to deceive anyone, but it does require that you understand the definition of correlation.

[saxondale351]

We are in a 5 year bull market, only about 30 percent of markets have ever run as a bull past that time. So its a 70 percent historical chance that a decent correction is in the next year or less. Personally I have sold a lot of puts deep out of the money for more than bid by about double. If a market drops I will be automatically set to sell puts a very good price for the year. Too many economists keep publishing the idea that the market is over priced. Now for the idiots who will try to say I am saying end of the world, no its not, but I think its a time to be careful unless you want to sit and wait a year or so to get back to even.

Its like what one big investor said at the turn of the century, when asked how he became wealthy. “I made a fortune getting out too soon.” - J.P. Morgan

[jimhcom]

Originally Posted by saxondale351

Cramer had a good point last night on all the investors saying a market crash is immanent. His point was that although there are a lot of stocks like TSLA and Amazon that are very over priced and can crush people there are also a lot of good stocks a that are not frothy. I did like his point about the negative nay-bobs look for that one time to be right.

Cramer does not have much of a record at recognizing when market corrections are coming.
The whole issue of whether stocks are overvalued or undervalued is a strawman, the real factor that determines when a bull market is nearing a time of correction is margin debt.

It is the percentage of margin debt that determines the level of scared money in a market. That scared money does not have the luxury of sticking it out when things get ugly. It also determines how much money is potentially available to do the purchasing that will curtail a bear market once it begins.

Margin debt is currently at an all time high.

[saxondale351]

Originally Posted by jimhcom

Cramer does not have much of a record at recognizing when market corrections are coming.
The whole issue of whether stocks are overvalued or undervalued is a strawman, the real factor that determines when a bull market is nearing a time of correction is margin debt.

It is the percentage of margin debt that determines the level of scared money in a market. That scared money does not have the luxury of sticking it out when things get ugly. It also determines how much money is potentially available to do the purchasing that will curtail a bear market once it begins.

Margin debt is currently at an all time high.

I have no idea why you put Cramer in the post. I guess you follow him? Margin debt is at all time highs. You can argue that that is a bullish sign, but its not a slow easy fall when it tops out. It will be a crash. Nothing can go up forever. As I said above I think to say its the end of the world is crazy, but to say the market needs a nice 15 percent pull back. Yep that is a good possibility. I think the percentages favor it. Maybe even a 20 percent. How many people who deny market reversals then cry and whine when the 2000 or 87s hit? If you are on the side lines waiting to buy in those are the people who make the big gains. a 20 percent correcting can do a lot of damage to the last two years of gains for most investors. Couple this with the fed tapering and any thing else added like Russia starting a hot war in Ukraine or North Korea and its Jenga.

[jimhcom]

Originally Posted by saxondale351

I have no idea why you put Cramer in the post. I guess you follow him? Margin debt is at all time highs. You can argue that that is a bullish sign, but its not a slow easy fall when it tops out. It will be a crash. Nothing can go up forever. As I said above I think to say its the end of the world is crazy, but to say the market needs a nice 15 percent pull back. Yep that is a good possibility. I think the percentages favor it. Maybe even a 20 percent. How many people who deny market reversals then cry and whine when the 2000 or 87s hit? If you are on the side lines waiting to buy in those are the people who make the big gains. a 20 percent correcting can do a lot of damage to the last two years of gains for most investors. Couple this with the fed tapering and any thing else added like Russia starting a hot war in Ukraine or North Korea and its Jenga.

Another important thing to remember is that when you take a 20% hit, you need to make double that amount back just to break even.
I learned a long time ago that the most important rule of making money, is to avoid losing money when possible.