Are Corrections Really Nothing Other Than Buying Opportunities?
03/03/2016 9:23 am EST
Sol Palha of Tactical Investor shares one chart he feels best exemplifies his belief that all corrections should be viewed as bullish developments; the stronger the deviation from the mean, the better the buying opportunity.
"And the trouble is, if you don't risk anything, you risk even more."-Erica Jong
A market crash can be viewed as a monumental tragedy or a splendid opportunity depending on what side of the fence you sit on. If you decided to pour all your money into the market close to the top, then it would be viewed as a tragic event. If, on the other hand, you got in early, and as the market trended higher, you banked some of your profits, then it would be viewed as a splendid opportunity.
Our overall motto as long as the trend is up (bullish) is to jump for joy when there is blood in the streets and panic when the crowd is euphoric. This one simple picture will explain why all strong corrections, or crashes, or whatever the naysayers would have you believe are nothing but buying opportunities. That is really what crisis investing is all about, seeing opportunity where others see disaster.
This chart dates back to 1990. What do you see? Well, we will tell you what we see? There is no such thing as a crash. A market crash is a matter of perspective and the masses always examine the situation with fear as their guide and foolishness as their master. It is a crash only if one is silly enough to wait until the top to commit all one's funds (which the masses are famous for doing) and if one is equally silly enough to trade without any stops in place. If you were playing the trend all the way up, then it's a correction to a pullback because hopefully you were prudent enough to take some money of the table as the markets soared higher. All corrections should be viewed as bullish developments; the stronger the deviation from the mean, the better the buying opportunity, illustrated by the green boxes. To read the entire article, click here...
By Sol Palha of Tactical Investor