Do you believe it Dow will rise to 30000 before the historic crash?
As the DOW and S&P 500 Index recedes from recent highs, many so -called gurus are still calling for the imminent market crash.
Yes, it is about time for corrective decline of 5-10% but better listen here, it is not all ‘gloom and doom’. As when corrective decline is in progress, you should grasp the new opportunity to get into the stocks again at the lower price for the next takeoff.
Why stocks can still rise a lot more after the anticipated corrective decline in the near term?
1. There is no evidence of irrational exuberance today. Retail participation is still very low. Active fund managers still inderinvest.
Active Fund manager still under-invest
2. The big players like central banks, investment banks must make money from somewhere. Bond has reached the peak and is coming down. Less and less people are trusting bond and even the ex-founder of Pimco, Bill Gross is leaving the biggest bond company. Gold and Silver (pays no dividend) is in the last phase of corrective decline. Obviously, equities is the best choice in terms of liquidity for the big players to make quick money
3. U.S is now perceived as the best country to invest in term of economic situation which seems to be safer and better than Europe and Japan. A lot of big capitals are flowing back to U.S. Though I don’t buy into the true strength of the U.S economy, but relatively, it still looks more attractive than elsewhere. It could be big lies but lies can go on to lift up the markets till they are exposed.
- Corporate earnings and economic data show strength across many sectors in the industry.
-the unemployment rate is at 5.9% — the lowest since September 2008.
- Second-quarter GDP expanded at a brisk 4.2% pace; residential home construction in August was up 8% over a year earlier, and so on.
- Inflation is low and under control. But cost-push inflation is up but who cares!
- Valuations are high relative to the past few years but still well below the 15-year average, according to data from market research firm FactSet.
Remember, market crash will crash when P.E and Retail participation reaches the extreme at the same time.
Even The traditional Dow Theory’s remains on a long term ‘buy signal’. It has not shown the following signals yet
• Signal 1: Both the Dow Jones Industrial Average and the Dow Jones Transportation Average must undergo a “significant” correction from new highs.
• Signal 2: In their subsequent “significant” rally attempt following that correction, either one or both must fail to rise above their pre-correction highs.
• Signal 3: Both averages must then drop below their respective correction lows.
Remember, investors must maintain perspective. No stock goes up forever, no market is bulletproof and we will surely see crash in the months or years ahead. We don’t want to be perm bull or perm bear but we want to be flexible and proactive in term of timing. Be reminded, there is always a time to buy and a time to sell.