Posted June 04, 2021
By Alan Knuckman
Is There a Crash Imminent?
I've been accused of being a perma-bull more than a few times throughout my career.
In fact, I even got in a texting war with a trading buddy of mine back in Chicago a few weeks ago. He's constantly sending me dire economic data (as if the market hasn't seen the ugly numbers before) and insists stocks HAVE TO CRASH and soon! Every pullback is the beginning of the end for him...
Oh, and I'll probably see him at my next cookout so I'm sure he'll be bringing his doom and gloom with him instead of a side dish.
But here's the thing
Markets have been through dozens of crises in the last decade. And guess what? We made new all-time highs following each one of them. As an old trading veteran, I know that markets can be irrational and do not have to reflect current fundamentals. This is always true. But markets can also forecast a better financial future. Optimism always wins!
The stubborn short sellers do periodically see market meltdowns. But if they fail to take profits almost immediately, they see their winnings evaporate again and again.
Don't let a reset cloud your judgement. There's still constructive action taking place in this market! Remember, the averages are not too far off their all time highs. As I have said many times before, sometimes it is more important what a market does not do in seemingly obvious situations as opposed to what it does...
The Money Flow in this economy is epic and stocks remain the choice for yield in this always uncertain environment. In the long run, my money is with the bulls.
Keep it In the Money,
Trading Tip of The Day: Avoid Pitfall Traps
Many newer traders get caught in the trap of trying to buy stocks that have recently dropped in hopes of a quick turnaround.
Yes, turnaround plays are some of the most lucrative trades you'll ever see. But you wont hit a winner if you are only buying because the stock is down big.
Remember, downtrends can last a long time longer than most investors expect. Snatching up shares of an ailing stock just because it's cheap or has taken a beating recently is a surefire way to get in hot water.
When you're looking for turnaround plays, make sure the chart is showing signs of life. Sure, you might miss the first leg of a comeback move. But you won't lose a chunk of change by taking a chance with a stock that's in free-fall