Maybe you have a 401k, mutual fund account, ETF or perhaps you are immersed in stocks and are beginning to worry about the continual fall of the market, or more specifically the Dow Jones. It has been falling precipitiously you know now for several weeks. Scarry huh? You already probably know that the 13000 mark is a significant psychological level and are hoping it will be a strong resistance level. Technically it should be but continual retracements back below 13000 will also be a concern. Continued slowing in the housing market is also significant since it set record highs the last 5 years and was thought by some to be "carrying" the economy.
We are approaching what a lot of institutional investors call a significant shakeout opportunity or that is an opportunity to scoop up additional shares when millions of smaller investors bail because of the market heat. This is also when, no doubt in concert, Bloomberg and CNBC commentators go on and on about the market dropping as if they do not really know what is going on. From the tone of their voices and their deamenaor you would think the end of the stock market is finally at hand. (Amazing how people high up in the financial world don't mind working a bit in concert to snow you even when your money is on the line.)
What is going on?, Drop in market volume. When investors disappear activity slows so volume falls; volume being the amount of stocks traded. It happens nearly every year about this time, usually from mid July into early September. Want to know why? People are on summer vacation and since investors are people too they like to go on vacation also. It's that simple, yet every year the market commentators, except for a few like Joe Kernen, act like there is serious and unique market drop going on with the result; smaller less experienced investors dropping their shares at the August or September low making the annual shakeout complete much to the delight of the institutional investors ready to scoop up the dumped shares. And yet even with investors returning from summer, and everyone knowing this, it is always difficult for the market to regain it's footing in September which is a solid testimonial to investment fear and market psychology but it is investor fear and market psychology that started this annual drop in the first place. Investors go on vacation, volume drops and then the more novice nervous investors left on board, seeing the drop in volume, sell their equities causing the annual Aug/Sept low and sometimes even into October. There is also the self-fulfilling aspect to this in that trading opportunists play the expectant drop.That is what is going on and this being July the market will probably get worse into next month so...here we go. Make no mistake, market operatives will exploit the trepidation of falling back to the 13000 level during the annual summer low like the opportunity of a lifetime. They will do everything they can to shake the money out of your pocket at the low and into theirs for a bargain buy.
Having said all that it is still possible, possible, that this could be the beginning of a major downturn in the market just happening to coincide with the annual summer drop in the market. Possible, but not very likely so as always keep your head up but above all, keep your head. It's just summer vacation time.
-a postscript 2007- It is the housing market that is still the concern here and it has continued it's decline over the last 12 months. Because the market has resisted for so long any real response to the housing decline and it's sub-prime difficulties, pressure you might say, has built up making this now a global concern with serious ramifications. Complicating this is the fact that the market is also due for a serious correction but all this bad news comes during our annual decline and shakeout time of the year. The talking heads are telling you to sit still but they have to do that being that the alternative is of course mass market chaos on their hands so their advice is worthless and the big investors gain from you being scared but none of them want a stampede into oblivion thusly the cautious tones.
No one can do your thinking for you and if they are you should not be in this market because brokers have their own agenda and your best interests are not always theirs, especially when things get really precarious. It is now your focus time so get a grip on what is being done with your investments and before making any big moves you may regret take a deep breath and just rememeber what time of the year it is.
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