What is this all About?
You may notice that we have not designated China as the villain in all that has transpired in recent Global market moves. That is for a reason, at best they can be viewed as a trigger because of their size, but the reasons for the volatility are much deeper. More on that in the coming weeks.
More important now is for investors to realize that the markets really did top at the end of 2014 and the movements of the last eight months have just identified a sideways distribution type period. There have been many market cycles over the past maybe 150 years. What may be different this time, is that the predominance of the “Fed Effect” has kept the professional traders from distributing their holdings in what is usually a distribution process. Usually weak investors end up holding the bag on the downturns, that is not the case here.
In my opinion, the period that the market now finds itself is the very early stages of a long term downtrend. If I were asked “what should one do if he or she are not professional traders ? , I would say wait until P/E ratios drop to the 4-7 range before you get back into the market”. That may take some time, years, but the period in-between as free markets evolve again will be volatile. It will take a major political shift to finally clean out the trickle down era that started in 1980.
Will there be big upward bounces as this unfolds? Absolutely, 2034 on the S&P 500 is still an upside bounce target. The main point, you probably should use bounces to unload stocks that you own. The low since the FED QE3 program started in Septermber 2012 is 1343, that is a long way down, I hope you don’t wait for that to be your signal.