Unless you were on a deserted island without any access to the world last week, you’re clearly aware that the global markets were in turmoil.
The Shanghai Composite, after their circuit breakers were triggered on two separate trading days, had to halt trading twice last week. With one halt coming 30 minutes after market open. It’s currently down over 15% from its month’s high.
While not as bad, we aren’t doing very well here in the USA. The Dow, S&P 500 and the NASDAQ are all down over 5% from their highs, with the NASDAQ retreating over 10% last Thursday.
Many analysts were speaking of a market correction and with the NASDAQ shaving 10% last week; we were technically in correction territory.
Considering the overall bearish sentiment on the Streets, one shouldn’t expect stocks to move significantly upwards. And the ones that do move, their gains are hardly sustained. This is a super important observation and one that I hope you take with you throughout your trading career.
Grab a pen and paper. I will repeat what I just stated. It is important to look at the general outlook on the markets first, and individual stocks second. In other words, in bear markets or when market sentiment is bearish; you will find that most stocks go down. Conversely, in bull markets or when sentiments are bullish, stocks generally advance.
That is not to say that a stock cannot advance in a bear market or decline in a bull market but generally speaking, stocks follow the broader markets.
Knowing what the broader markets are doing should help you significantly when you decide to place a trade. Someone once said, it is more comfortable to buy stocks on an advancing market and to sell (go short) stocks, on a declining market.
That is why I stated in my watch list yesterday that I will continue to monitor general market conditions and as it stands, most positions will be shorts unless the tide turns. My NGL and ATHX shorts are winners because of this.
Good, Bad or Ugly, get involved and leave a comment somewhere I can see.
Legal Spiel: I am not an investment/financial advisor. Nothing in this blog or my blog “Market Declassified” should constitute a recommendation to buy/sell any securities. Past performance is not indicative of future performance. Stocks carry inherent risks and you can potentially lose your shirt, house, car, clothes, kids if you’re not careful. Please do your homework. Diligence remains key.