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2015/06/01

How to Spot a Hidden Stock Market Slump

Searching for a stealth correction...
Rude Awakening
June 1, 2015
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How to Spot a Hidden Stock Market Slump

  • Searching for a stealth correction
  • Breaking down the chop
  • Plus: No one wants soy anymore...

Greg Guenthner coming to you from Baltimore, MD...

Greg GuenthnerWhat if I told you we were in the midst of a stock market correction? And what if this correction has been going on for months--right under your nose--without you even noticing it?

You might call me crazy. Or an idiot. Maybe both. But the simple truth is that stocks haven't been kind to the buy-and-hold crowd so far this year. That's because--despite everything the mainstream financial press will tell you-- the major averages have been in "correction mode" for months.

I'll explain in just a minute. And once I do, you'll learn how to spot these stealth corrections on your own... and even use them to your advantage when you're trading.

But back to this whole crazy correction idea for just a minute. You might be wondering how a market just coming off its all-time highs be experiencing a correction?

Well, ask any trader this year and he'll tell you-- Mr. Market ain't playing nice. Sure, he'll whisper some words of encouragement. He might even give you healthy confidence boost with a well-timed speech. But in the end the stock market is Lucy pulling the football at the last minute. And you're the one spinning end over end after whiffing the kick...

"The way I see it, we already are correcting," our technical analysis guru Jonas Elmerraji explains. "No, stocks aren't outright dropping now. In fact, they're at new all-time highs! But this grinding 2015 price action has basically been having the same effect. It threw a bucket of cold water on investors after the last couple of hot and heavy markets. People just don't know what to make of stocks right now."

There's your correction...

See, the market can correct in a couple of ways. The obvious one is where stocks fall off a cliff. But then there are corrections like we're seeing this year--when stocks just chop sideways for months and months. These "time corrections" can gobble up traders and make longer-term investors question the health of the bull market.

And that's understandable. After all, we're dealing with the third-longest bull market in U.S. history right now. Don't believe me? See for yourself...

It makes sense that folks are getting a little antsy.

But Jonas reminds us that we need to keep this market action in context with what's been happening over the past six years. That includes the Fed juicing the markets and the average investor stuck riding the pine...

"What I think a lot of market watchers are missing right now is the fact that we're in an environment with very few individual market participants and exceptionally low volatility," Jonas says. "A correction here isn't necessarily going to look like the sort of correction (or crash) you'd expect to see in an exuberant stock market."

Remember, the market's never going to look exactly like you think it should. Stocks aren't magically going to obey your every command. And corrections aren't always going to look like they do in the movies. And with all these folks twiddling their thumbs as they wait for a correction--maybe they're experiencing what they're looking for right now without even realizing it.


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Rude Numbers

When to Buy... When to Sell
115

points dropped off the Dow Jones Industrial Average Friday. That adds up to a loss of about 0.65%...

$59.59

buys a barrel of oil today. Crude posted a quick comeback to end the month of May. It's down about 1% in early trading today...

$2.63

is the price of natural gas this morning. Natty has been in free-fall for over a week now. It's trying to stabilize today...

$1,186
is where you'll find gold futures. The shiny yellow metal is off by about $3 in early trading...
2,111

marks the spot for S&P futures just before the morning bell. Stocks are looking at green open today as we begin the new trading month...


Rude Trends

When to Buy... When to Sell

You can learn a thing or two by following the mass affluent. If you can keep up, that is...

"My wife--somewhere below the 1% but well above the 11%, thanks to her family, not my university salary-- wants to share a thing or two with you," a reader explains. "Tell whoever wrote that 'soy lattes are a thing of the past' that almond milk lattes are the new 'it' thing. Lululemon might have made a comeback, but soy hasn't." Straight from a woman of Orange County. Take that for what it's worth!"

That's actually pretty useful. In fact, I'm a fan of seeking out credible female sources when it comes to brands (especially the higher-end ones). When you find a hot chart that lines up with a theme that your fashionable friends are talking about. It's not a surefire strategy on its own. But it works great if you're trying to get a little confirmation as to what the market's whispering to you...

[Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner]


Ignore At Your Own Peril

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