Is the correction about to start?

[tokyopua]

Tokyo, you look like me when I had 18 months in the stock market. Looking for everything around, studying several strategies to make the most out of my money. Getting excited about new indicators, strategies, strategists. I think it is a journey you need to take to fully understand the game.

But I tell you that in my 11 years of experience, I spent several years studying hard and thinking I had something and no, I was wasting my time. The time I took to learn the game (obviously, I'm still learning), was a lot longer than what it could have been, had I been somewhat more, how should I say it, conservative?

I wonder, you want to try to time a general market correction to save some money or else do you want to do it to make more money than what you've been doing?

One of the things I've learned (but it took me several years, unfortunately), is that the trend is your friend, and the trend doesn't change until it has changed. If you look at the chart of the SPY below, the trend is bullish.

One always thinks he can get out when a correction starts and then get in lower when the bull begins again. My believe is that this is an illusion. A bull market is made with few big gaining weeks, and if you miss one of those because "a correction is due", you miss the biggest part of the move. You end up making a $4 profit in a $20 move, as Livermore explains.

As for the QID, if the Nasdaq 100 rises 50% from this point the QID will be worth $0. And if the Nasdaq 100 rises 50%, it will still be 45% below its all time high set in 2000. In fact, the Nasdaq 100 needs to rise 175% to approach a new all time high. I don't know when will the Nasdaq hit a new all time high, perhaps that will be just 10 years from now (the Nasdaq would need to rise 10.6% a year, on average), but that is the trend! Or do you think the technology sector in the US will never be at its highs again? Think again, the history tells you the bulls always win over the long run, because losers fade away (I mean, losing stocks). It also has to do with the way the indexes are constructed.

There's a lot more to say about this subject. We'll keep talking, thanks for the thread

Thanks for the reply David.  I agree that right now I am looking in many areas for new information and there is some extent to which I am getting too much information.  That is probably even easier for me at 18 months in than it was for you almost 10 years ago due to the internet, lol.

My goal is not to make more money than I could, it is to save money.  In the last correction I didnt even know after it started that there was such a thing as a correction, and I kept holding and hoping.  I think just educating some of the newer members that markets correct from time to time in bull markets is a good thing, so if this thread does nothing more than that and we continue the bull market unabated, I will be happy with that.

I totally agree that the general long term charts on all indices are still bullish, and I have absolutely no doubt that technology in general will drive markets to new highs over the years, even higher than most investors can fathom.  I am reading a book called "The Singularity Is Near" by Kurzweil which has almost nothing to do with stocks, but it does outline the paradigm of accelerating acceleration in the evolution of technology.  This cannot help but push markets higher, I am probably more of a bull than most people after realizing this.

So as far as my 2 day old forray into the QID, its just a hedge, and like any other stock I will sell it if it goes down past acceptable limits, it is not a long term investment.  Today my portfolio is green again with 7 other long stocks, and QID is losing me all of $10 dollars total lol. 

I just dont want to lose money in a correction if it can be timed like IBD says it can.  I saw their method work to somewhat time the last correction, and they also were able to say that a new rally had started in earnest last summer.  So im my 18 month stint, they became the authority on that.  It should be noted that they have not yet called a correction, but the pieces in terms of distribution days are in place.  I still think we get one more this week, and then that is 4 days in 4 weeks.

So I am still a bull, just a cautious one, ready to be a bear for a few months if I need to be if a correction happens. 

[tokyopua]

Looks like the correction started, the other way lol 

I sold QID this morning early on.  I realize I dont like the idea of hedging.  Its wierd to look in your portfolio and be rooting for the market to go down so one stock goes up while you want the market up for all the rest to go up.  New experience, new learning.

Still not sure we are out of the woods yet, Friday could be pretty crazy given the two huge up days we had so far.  $NDX back about the 50 sma, so Im now cautiously optimistic....

[nullzero]

Wait to short till summer, historically summers have been bad for the market. Also the real estate situation will unfold more over the summer if nothing is selling and the situation is just getting worse.

[tokyopua]

Today is the first time since August that the $SPX and $DJI have even touched their 50sma, and are now fairly well below them.  The distribution day indicators I mentioned are not a factor on the 4 week outlook, but maybe they still are an issue if you go back 6 weeks. 

Anyway, still too early yet to say the correction has begun, but the moving averages getting breached for the first time is something worth watching going forward.  Nonetheless, I sold many of my high beta stocks at the open today and took profits.  Mostly I have gold and sliver stocks left. 

Its a tough day, GLTA 

[tokyopua]

I sold my last 2 metal stocks and am in cash for the first time in about 18 months.  It actually feels good even though I lost money compared to the last few days, but I still have nice profits for the year so far, quite happy with that. 

Today is what I was preparing myself for with this thread.  It allowed me to sell almost all my stocks right at the open and avoid even worse losses than I might have had.  During the last correction I just couldnt bring myself to sell, this time I didnt mess around, I just cut them loose.

I think the answer to the title of this thread is yes, the correction started.  If nothing else, today in itself is a correction, and there might be a little bounce, hopefully there is.  But in technical terms, there is still more downside likely.

[capricho]

Having sold 75% of my portfolio yesterday I decided to pull the trigger on the remaining 25% this morning at the open. I'll be putting most in a 6 or 9 month CD as a way to batten down the hatches and get sleep at night. Correction? Yes, I'd definately say so.

[Terliso]

I also sold all my 11 holdings, I'm all cash right now, ready for the bear side.

[tokyopua]

Applauds capricho and Terliso, looks like we managed to miss the worst of this super drop that just happened.  As crazy as this is, we are witnessing history here.

[jorgegr]

Glad all you guys are managing to keep your cash safely on hand.

As I posted some days ago have a strong investment in QID
nevertheless feel sorry to see some of my profits gone today
in CGR, MSI which I sold this afternoon and regret that waited
too long to get rid of DIET.

Now I'm also 70% in cash.

Good luck to all

[Se7en]

To bad I didn't see this video earlier, this guy was kind of predicting this collapse last week, excellent video!!!

http://www.redoption.com:80/shadow_video.php

[Terliso]

Today was the highest volume ever for down-day in Nasdaq history, past 3 billion.

[lancefur]

I see a little too much panic out here. Maybe it's justified, maybe it's not. I read from David's post on the closing thread of todays actions that he has his doubts and that concerns me that within hours one's whole perception on the market can change. We had a correction today, granted a huge correction and I did lose big. I unfortunatell do not have the advantages of watching this alot and should have sold this morning but who knows. This crap in 20/20 at best. The next few days will be a better indicator of what's to come I think.

I think a good night's rest is in order for us who got the crap kicked out of us. I am still up for the year but down considerably from a week ago. I am down 12% in one week.

I hope David can asnwer the statement made earlier today that good stocks will rebound nicely and the crap will do crap. Also, this looks like a technical move more than a fundamental one, will not fundamentals prevail and those are the factors we should be looking at?

I also do not wish to lose anymore so who's to say what I will do tomorrow but I don't also want to sell this stuff only to find out I need to buy it back a week from now at much elevated prices.

I hope this thread gets many posts from a lot of people tonight to see where there thinking is on this? I also am sure this will depend on if you are a long term holder or a swing trader. I would like to see that disclosed as well since it may indicate the state of thought too.

What would Buffet do? What did Buffet do?

[tokyopua]

Good questions Lancefur.

I suspect that you are right that this is not fundamental, rather technical.  However, a correction did happen, and may well continue for awhile.  My feeling is we simply need to keep our eyes on China.  Their chart is a bubble, and that simply has to pop.  While it does, it will have some reprocussions around the globe.  If they drop again overnight the crazy thing is that the market here can gap down again.

The thing that got me to start this thread more than anything else was the distribution days which IBD taught me to track.  It was what had me ready to sell all my stocks and not ask questions like I did last time.  Since they helped me prepare for this, I believe they can also help me prepare for re-entry to the market.  They have a technique for that too, and as I mention in this thread, it worked to to time getting back in after the May 06 correction.

I will share in this thread tonight the IBD Big Picture article, and see what they have to say.

I sincerely wish that everyone who participates here at 3SOF can minimize any possible losses going forward, and that we can all come together to form opinions and advice that will help in that process.   I will do my best in that regard.

[buddjas1]

I view today as a blessing.  There are so many undervalued stocks out there that took a severe beating today and probably will for the rest of the week.  This correction is a great opportunity to pick up some cheap shares in some great stocks. 

[mbaugh]

I realize its hard to predict where the market is headed.  My opinion tells me this is a short-term correction that could last for several days or weeks.  One thing I'm going to do is study the old threads (if I can find them) from the last big correction that happen last spring.  I'm only doing it for a reference, just to see what the indicators were and everyone's opinions.  Then compare the opinions to the actual outcome.   Another thing I learned from the last big correction was find a good short, a company with alot of outstanding shares and high-priced.  For example, Last spring I shorted 1000 shares of JOYG when it was falling, but due to inexperience I kept covering and re-shorting each time the stock moved back up.  I still made some money, but if I had kept my short just for a week, I could have grabbed a 10 point downturn.  So this time if the market has another bad day tomorrow I'm thinking of shorting JOYG or PCU since they seem to go down big.  Also they are coming off their 52 week highs.  I understand that both companies are good fundmental companies, but in a time of corrections, it doesn't matter for the short term.  The long-term is still good for both of these companies.  My advice is to take it slow and don't feel like you have to get back in the market right away.  I still believe that David should continue the 3 stocks on fire board everyday since there will still be tradeable stocks on a daily basis.  Gotta go eat dinner, Good Luck Everyone!