Stocks Will Crash One Day
The crowd always panics when the markets are pulling back, never when they are running up. Why is it that they wait for the markets to pull back strongly before jumping into the den of panic and misery? 2016 stock market crash, is eerily similar to 2015, 2014, 2013 prediction for a stock market crash. All these predictions were as good as garbage; even a broken clock is correct twice a day.
Like clockwork the reaction is always the same; there is never any variation. The masses panic and dump the baby with the bathwater as they flee for the hills and listen to the fear-mongers the moment the markets experience a strong pullback. The top players use this to their advantage. Take a look at any so-called market crash or financial disaster and you will see that the markets recovered from each and everyone and recouped all the losses and then some in the process.
VIX is being used to stoke stock market crash fears in the Masses
VIX has been trending upwards, but it has not spiked up yet; there is a possibility it could follow the path we have outlined in the red line (look at the second chart). However, even if it does surge upwards, it will trend down towards the new norm, which falls in the 12-18 ranges. While it is hard to think straight when panic is in the air, this is precisely when you should force yourself not to react and give into panic. When fear governs a person’s actions, the outcome is nearly always unpleasant.
When market volatility is running high as is the case right now, it is best to tighten one’s stop.[/color-box] Yes, it’s not the best feeling to be stopped out, but it is far easier to recoup from small losses than from major ones. Another way to look at it is that if you are stopped out and you liked the stock, you now have the chance to buy the stock at an even better price.
Take a look at a five-year chart of the VIX. What stands out immediately is that every Spike upwards was short-lived, and shortly after the spike up, the VIX has traded in the low ranges for an extended period.
Stocks Will Crash One Day But Not Until The Masses Turn Bullish
Forget the VIX and focus on Investor Sentiment. For the past five years, the VIX has traded in 12.5-20.00 ranges; the upper range is 2 points wider than the one year chart. This picture clearly illustrates that giving into panic does not pay. You have a clear pictorial representation illustrating exactly when the Crowd panics. A spike up is associated with a strong pullback and vice versa. Note how much time the VIX spends in the low ranges. Low VIX readings correspond to higher market prices and vice versa.
The VIX is not supporting A Stocks Will Crash Mantra
In this chart, we have laid out the probable path we think the VIX is likely to take. Even it does spike upwards, instead of panicking we would view this as a positive development. History indicates that after a spiking upwards the VIX always pulls back and spends more time in the lower ranges. Lower reading usually correlates to higher market prices and spikes usually correlate to market bottoming action.
Our volatility indicator is now trading in record territory; a clear confirmation that 2016 is going to be the most volatile year on record. As a result, the VIX will experience extreme moves to the upside and downside more often. The moves to the downside will be longer in duration as the trend based on our trend indicator is still positive.
Which one would you rather play; a correction that begins and ends suddenly giving you little time to react, or a nice upward move, that lasts four times as long and gives you ample time to jump in and or out. 2016 stock market crash outlook could come to pass but it also could have come to pass in 2013, 2014, 2015, etc but the markets did not crash. Instead, the stock market has trended higher and higher; over the long run, markets trend upwards and not downwards. View stock market crashed as long-term buying opportunities. If 2016 stock market crash comes to pass, make a list of top-notch companies and open long term positions.
Volatility is a two-sided equation, and we believe the moves to the upside will be even larger than the moves to the downside. Use the time wisely now to build up a list of stocks you always wanted to own but could not get into because the price was too high.
New Thoughts Aug 2019
Free market forces ceased to exist a long time ago. What we have now is the illusion that the markets are free but everything is manipulated; from the food, you eat to financial data you are fed. Identifying the problem is over 80% of the solution, and this is why most people do not know what to do because they do not understand the problem. Stock Market Crash 2017 or stock market crash 2016, the story is the same; only the packaging changes. Don’t follow the masses for they have an uncanny knack of doing the wrong thing at exactly the right time
Market Sentiment is far from bullish
Take a look at the gauges below and it immediately becomes obvious that the only ones that are scared are the ones that historically fare the worst. Anyone with the mass mindset falls under that category. In other words, lemmings will always be lemmings and their only function when it comes to the markets is to be used as cannon fodder.
The mass sentiment is far from bullish, hence all strong pullbacks, corrections, etc ranging from mild to wild have to be embraced. Don’t find the trend for it’s your only friend.