A big 5%+ down day is way overdue

Discussion in 'Trading' started by detective, Aug 16, 2007.

  1. Since 2002, there hasn't been one of these big market down days. It is long overdue, and if it happened this week, it would crush a ton of longs. There are so many put seller hedge funds and dip buying retail traders that it would definitely clear out the landscape of the overoptimistic.

    The bull market lasted for 5 years, the bear has returned. Its not going away in 2 months like '98, that's a fantasy. Its going to be one of those long drawn out bear market that just wears people out until they get sick of investing in stocks.
  2. una11


    Explain why it won't be like 98 and will instead be a long bear market.
  3. Until October/November. Then off to the races. The market is doing exactly what is expected if you've been following it long enough.
  4. una11


    I agree - strong parallels between now and 90, 94, and 98 - could spike another 5 or 10% lower from here, but I don't see an extended bear market.
  5. you're correct this won't end until we get a huge 5-10% 1 day capitulation move down
  6. jetbird


    I agree, we need to get the big flush. I expect 12000 ish on the DJIA(March Lows) to be the first level where a base may form.
  7. I don't see a '98 scenario because back then the problems were not US related, they were coming from Asia and Russia, which caused the LTCM collapse. Also earlier this year in March, the problems were from China's stock market going down a bunch in one day, not a problem in the US.

    In '07, its a completely different ballgame. The problems are literally right at home. People talk about it being a subprime problem and the contagion from that spreading to other credit markets. In actuality, the subprime crisis is an offshoot of firms becoming overleveraged, having lax lending standards, and basically encouraging home speculation. There is still a lot of pain, in fact, most of the pain is in front of us with the reset of a load of teaser rates on the 2/28 mortgages vintage 05 and 06 hitting the market in earnest soon this year till late 08.

    As for 1990, I don't see that scenario, stocks were WAY cheaper back then, and people still didn't consider stocks a bedrock of their portfolios like they have the past few years.

    This bear is gonna last for a while, stocks are still overvalued.

  8. No, this one won't end in a big capitulation, it will be more like in '02, where people just got tired of stocks and threw in the towel not in one fell swoop, but in steps. A 5% down day will be one o f those steps.
  9. I love people like you I just cleaned up getting long the SPI best trade ever in 15 years buy the market as it starts to retrace back up and you will be laughing I know I am. These markets will proabaly finish close to positive this could be the floor in the market get in while you can
  10. People have been so conditioned to buy dips that you will have sharp bear rallies where people are gonna say we've seen the bottom, only to see lower lows.

    This year is gonna be a humpback market, the highs were seen just last month, we're in 2nd inning of this thing.

    You will get oversold rallies, I guess you can play those, but one day, that 2% down day is gonna turn into a 5% down day nightmare for dip buyers.
    #10     Aug 16, 2007