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.
And even after Brexit, stocks simply roared right back.
But I am standing my ground, backed by time-tested models. And the facts now are this …
A. Even before the stock market started to plunge last week, more than 42% of all publicly traded U.S. stocks were down at least 10%.
B. Now that the market is falling, those figures are even greater. More than 46% publicly traded stocks are now down more than 10%.
C. And fully 24% are now down more than a whopping 30%!
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 go 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, pullback, crashes, mini-panics, market rallies in bear markets, etc. — all create the energy needed for the major underlying trend to finally re-emerge.
|It’s the crashes that pave the way for the next bull run higher.|
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?!
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 on course, but far more importantly …
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 few years.
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 still crash? If so, where might it stop?
First, according to my models, the correction will still come.
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, in a normal three-month correction.
As to gold; it still needs to correct, massively. Same for silver and mining. Do not touch them at these levels.
Best wishes and stay tuned …