Correcting the Bias for a Stock Market Correction

ByGreg Guenthner company, investing, jonas-elmerraji, king, market, media, stock, twitter, william Comments Off

This is the end.

The market is rolling over. Pain and pestilence await all investors.

At least, that’s how it feels after Friday’s drubbing. Stocks took some serious punishment. Relentless selling pushed the S&P 500 down more than 2% on the day.

But in reality, our perspective is way off. The market has been much too agreeable over the past year or so. We haven’t experienced anything close to a serious correction, making last week’s action feel like a stock market apocalypse…

What’s getting lost in the shuffle is the fact that the broad market is just about 2% below all-time highs. That doesn’t mean I liked the market action I saw last week — but it does put the move into perspective.

As I’ve discussed before, the broad market has been trading near the top of its range for weeks. In fact, we could see the S&P shed another 50 points before it approaches support.

“Bears who have been wrong for the last two years have been beating on their chests screaming ‘THIS IS IT!’ in opinion columns and on Twitter, but the fact remains that the S&P 500 could drop another 4% without violating trendline support,” explains my trading buddy Jonas Elmerraji. “Unless support gets broken, this is just another correction, not a crash.”

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Correcting the Bias for a Stock Market Correction

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Greg Guenthner