I can't tell you the complaints I've received over roughly
the last 14 months, when I started warning everyone that a stock market correction
was coming. Possibly a big one.
They said I was nuts. That I was a stopped clock. After all,
the major indices such as the Dow Industrials and the Nasdaq were making one
new high after another.
I even told investors who were interested in dividend income
to stay out, they'd lose more than they could possibly earn in dividends or
royalties when the principal of their investments would plunge.
But I stood my ground, backed my time-tested models. And the
facts now are this …
A. Even before the
stock market started to plunge last week, more than 67 percent of all publicly
traded U.S. stocks were down at least 10 percent.
B. Now that the
market is falling, those figures are even greater. 70 percent of publicly
traded stocks in the S&P 500 are now down at least 10 percent.
C. And fully 31
percent are now down at least 20 percent!
D. Globally, more
than $2.5 trillion has been wiped off of stock values in the past year!
Thing is, most
investors who didn't listen to me, won't listen to me when I scream that the bottom is in and that the Dow
Industrials are headed to well over
31,000 over the next few years.
And that Asian markets, as ugly as they seem right now, will
do even better, with China probably quintupling.
Instead, they will be panicking near the lows, claiming it's
the end of the world. That the Dow is going to below 5,000 or some ridiculous
number. That China and Asia are going to crash and burn. That the only safe
place to be is in U.S. Treasuries.
And guess what? Those investors will …
A. Miss out on the
biggest stock market gains, ever. And …
B. They will lose
almost every penny they invest in U.S. or European sovereign bonds.
Let me give you perhaps the two most important insights you
could ever have on how markets work. Insights that you only get from studying
thousands of years of data every which
way you can, and from being a professional trader yourself.
First, the majority of investors lose money. They are caught
on the wrong side of the markets, especially at extreme highs and lows.
Second, pullbacks, crashes, mini-panics, bear market rallies
in bear markets, etc. — all create the energy needed for the major underlying
trend to finally reemerge.
In other words, it's the crashes, like we are seeing now in
stocks, that pave the way for the next bull-run higher. It's the way the
markets move, like a giant pendulum, swinging from one side to the other, from
fear to greed and back again.
Let's say, for instance, that the swing of the pendulum to
the right is a bull market. How can it possibly swing to the right unless it
first swings to the left?!
And on the flip side, let's say the pendulum's swing to the
left is a bear market? Well, how can it
possibly swing to the left if it hasn't already swung to the right?
Get the picture? That is precisely how markets work. To get
those swings, the majority of investors must, by definition, get trapped,
bailing out precisely at the wrong time.
Shorts bail out at tops; longs bail out at bottoms.
And only the savvy know when to get out and back in at the
right times!
That's also why I couldn't be happier about what's happening
in stocks now. Not only because I've been right of course, but far more
importantly ...America's biggest corporate bankruptcies to date are: Lehman Brothers, Washington Mutual, Worldcom
Inc., and General Motors. But these are nothing compared to the next big
bankruptcy on the horizon.
It's setting up that inevitable swing back to fear, which
will create the energy for the pendulum to swing back in the other direction,
to the right, and help fulfill my long-term forecast, that the Dow is headed to
31,000+ over the next two years.
Problem is, as I said before, very few investors, except
those who subscribe to my Real Wealth Report and my Super-cycle Trader, will
profit from it.
I'm not boasting mind you, I am just telling you like it is.
Even if you're not a member of my
services and never become a member, please at least take the lessons I try to give you in these columns
seriously; they will help you to both
avoid losses and make more money to boot.
So what now for the stock market? Will it continue to crash?
If so, where might it stop?
First, according to my models, the correction is not yet
over. We should see a bounce back develop this week, if it hasn't already done
so by the time you read this column. But that's all it will be, a bounce.
Second, major support for the Dow Industrials, the index
most widely watched, comes in at the 15,672 level. If that gives way, the Dow will
likely fall much further, to about 13,937.
Third, the correction, or crash, or whatever you want to
call it, should be over by October, and may even come to an end this month, in
a normal three-month correction.
I won't be able to determine that until we see how the
markets close out the month, on the last day of trading on Monday, Aug. 31.
At that time, I'll be able to run my studies and update my
forecasts. Month-end closings are more important than weekly closings, which in
turn, are more important than daily closings.
As to gold; no it has not bottomed. All you are seeing is a
bear market bounce. That too will end
soon and give way to a renewed decline that will take gold below $1,000.
Best wishes and stay tuned …Larry
Source: Money and Markets
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