Correcting Your Correction Bias

The market is rolling over. Pain and pestilence await all investors. January 27, 2014     Correcting Your Correction Bias   Investors slam stocks. Now what? Crash callers get some fresh ammo Plus: Mastering the "I don't know" trade   Greg Guenthner coming to you from Baltimore, MD... Greg Guenthner This is the end. The market is rolling over. Pain and pestilence await all investors. At least, that's how it feels after Friday's drubbing. Stocks took some serious punishment. Relentless selling pushed the S&P 500 down more than 2% on the day. But in reality, our perspective is way off. The market has been much too agreeable over the past year or so. We haven't experienced anything close to a serious correction, making last week's action feel like a stock market apacalypse... What's getting lost in the shuffle is the fact that the broad market is just about 2% below all-time highs. That doesn't mean I liked the market action I saw last week--but it does put the move into perspective. As I've discussed before, the broad market has been trading near the top of its range for weeks. In fact, we could see the S&P shed another 50 points before it approaches support. "Bears who have been wrong for the last two years have been beating on their chests screaming 'THIS IS IT!' in opinion columns and on Twitter, but the fact remains that the S&P 500 could drop another 4% without violating trendline support," explains my trading buddy Jonas Elmerraji. "Unless support gets broken, this is just another correction, not a crash." Are we due for a deeper correction than a measly 11% pullback this time? Probably. Does that mean it is starting right now? I'm not sure just yet. I don't know, you don't know-- even Marc Faber's tiny ponytail doesn't know how the market's going to react this week. So far, a longer-term investor shouldn't react to this action. But if you're trading, honor your stops and consider riding the pine for the next couple of days while the market digests Friday's big swoon. If you're feeling adventurous, I have a crazy way to fade this market for PRO readers below. Click here to get access…         A Secret Even the NSA Doesn't Know About We've kept it under lock and key for months, now. Finally, our publisher has decided to let the cat out of the bag, but NOT to the general public. This secret is being revealed to our loyal readership only, and for a very short amount of time. Don't get left behind. Click here now, while you still can. This announcement will be shut down at midnight tonight.           Rude Numbers Targets, Predictions and Wild Guesses   $588 billion in cash sits in the coffers of the world's 10 largest companies. 2,400 mobile technology patents were just acquired from HP by Qualcomm, including 1,400 U.S. patents and about 1,000 from other countries. $50 billion worth of semiconductor chips were bought up by Samsung and Apple in 2013, according to the Wall Street Journal. 318 points fell from the Dow Jones Industrial Average Friday. The Dow finished the week down about 3.4%. Meanwhile... $1,260 is where you'll find gold futures this morning. Gold gave back its Sunday evening gains late last night. Even so, the yellow metal has churned slowly higher for more than one month...     Rude Trends When to Buy... When to Sell   One of Jonas' favorite fund managers, Frank Texiera, employs a simple mantra when it comes to the markets: "As soon as you start off your day with 'I don't know', you're starting off from a pretty good place," says Frank. Stick with "I don't know" and you'll be ready for whatever the market throws your way... "As traders, we're not married to any market view - instead, we're 'bullish until we're not'. More specifically, we're not bullish anymore when the uptrend in the S&P 500 gets broken. That's our trigger," Jonas says. "Notice that I just used the word 'when', not 'if'. That's because all trendlines eventually break, even this one. It could happen next week - but it could also happen next month, next quarter, or next year. By being reactionary to the market, we'll make sure that we stay on the right side of it when the time comes." Click here to find out how Jonas is trading this market right now... [Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner]     Ignore At Your Own Peril Today's Must Read Links   Stunning 10-Year Forecast Just Released The One Retirement Plan Obama Can't Touch Tax-Free Income, Now Made Easy     BE SURE TO ADD dr@dailyreckoning.com to your address book.       Additional Articles & Commentary: Join the conversation! Follow us on social media:         The Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Agora Financial delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from The Rude Awakening, click here. Please read our Privacy Statement. For any further comments or concerns please email us at rude@agorafinancial.com. 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