Big down days in a flat market
Today’s 350 point drop in the DOW tipped all of the market
averages into the red for the year. Concerns about Greece the Greek fiscal
condition and the Chinese market have presented the market with a formidable
two headed monster to overcome.
Adding to concerns for the stock market is today’s selloff,
which penetrated the 200 day moving average for the S&P 500. Conventional
signals point to this technical occurrence as a sign of a further decline.
Conventional wisdom on Wall Street is rarely reliable, as we
know. In 2014, we had two of these occurrences where the 200 day moving average
was breached. In each of these, the S&P 500 rallied 6% over the next month.
So, this implies that conventional signals should be disregarded. Our markets
are likely to be making an intermediate term low point following today’s
selloff.
In this “Long Dry Road”, where a flat market is like
“Watching Paint Dry”, a selloff of this nature is a great opportunity to invest
and make short term profits when the market recovers.
Wednesday begins a new quarter. Companies engaged in
substantial stock repurchase programs often suspend this program until their
earnings are reported. These buybacks are reinstated after the earnings report.
For investors looking for money making opportunities, it will pay off to wait
and invest in these companies sometime between now and the middle of July.
Assets can still thrive when they can gain in a flat market.
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