'Extreme fear' is back for the stock market

Discussion in 'Stock Market Forum' started by Rainman, Jul 28, 2015.

  1. Rainman

    Rainman Senior Investor

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    U.S stocks have been falling for a little while now. Is the stock market crash which has been predicted for several months finally here or are there other [economic] factors affecting the stock prices [negatively]?

    http://money.cnn.com/2015/07/27/investing/stocks-markets-fear-and-greed-index/
    Just how bad is it? The index has a 100 point scale -- with 0 indicating nightmare level fear and 100 signaling "buy everything in sight" greed. On Monday, the Fear & Greed Index fell to 7 . . . the U.S. stock market is in the midst of its worst losing streak since January. Monday is the fifth straight day of losses . . . Investors are spooked by the same factors that have been around for months: China's slowdown, Greece's possible exit from the euro, and the Federal Reserve's first interest rate hike expected in September . . . while America investors don't have a lot of exposure to China's stock market, they do have exposure to China's economy since so many U.S. businesses are now operating there.

    Time to sell before the prices drop further?
     
  2. ScooterBrandon

    ScooterBrandon Senior Investor

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    See how those earnings come in.
    Could just be a good buying opportunity.
    I imagine this is just some profit taking.
     
  3. coloradogy

    coloradogy Active Member

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    Saw the article you cited the day it came out. Read it and felt it had a tad too much of a "fear-mongering" tone. I will admit, however, the volatility has not disappeared due to China, Greece, and the Federal Reserve. The rout that happened Monday (7/27) was rough but today (7/28) was great! (my example of extreme volatility.

    I agree with Scooter (hope I don't offend shortening your name). Earnings will tell all. One of my favorite companies, Lyondellbasell (Ticker: LYB), is highly tied to oil price. They've been slammed since oil dropped again but that was all changed today. Record earnings, YoY EBITDA increase, and positive outlooks for some of their major products. Also, many "blue-chip" companies are still posting earnings beats.

    My opinion: China, Greece, and Federal Reserve rate increase are still pricing themselves into the market. When Fed raises the interest rate, stock market will drop but a lot of volatility will disappear. Much like the kid going down a water slide. The apprehension of what is to come scares more than the actual result.
     
  4. JR Ewing

    JR Ewing Super Moderator Staff Member

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    If you're a novice, I'd say just stick to your index fund, mutual funds, or longterm stock picks, and continue to dollar cost average into your investments with new money every paycheck. And don't be afraid to keep a little cash handy.

    If you're more advanced, you might consider always having some long stock positions, some shorts / puts, some cash, at least a little in "alternative" investments such as commodities and real estate, and at times at least a little in debt as well. Never be 100% long stocks IMO, and certainly don't ever be anywhere near 100% short, or 100% commodities or cash or whatever.

    The markets have a general upside bias built into them for various reasons. The Dow, S&P, etc go UP in the longterm because most investors are long, and because companies that get into these indexes and stay there are generally the better companies.

    Either way, the market will do as it will do. If you try to time the market, you'll almost never be dead on - you'll sometimes be dead wrong, other times be at least somewhat off, and rarely be right on. You'll miss opportunities and waste lots of money being wrong if you're too obsessed with the short term.

    Better to be more bottom up - look for good companies to get cheaper when markets sell off.
     
    Last edited: Jul 29, 2015
  5. SteakTartare

    SteakTartare Senior Investor

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    There seems to be a lot of fear and loathing in the market this week. Long term, I'm not too concerned about it, though I wonder about what it portends in the short term.
     
  6. baudwalk

    baudwalk Senior Investor

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    The longer market dips in the last, 4 decades of the 20th century served me well in my working years. Reinvestment of dividends bought gobs of additional shares in a nice multiplying effect. I had chosen an aggressive portfolio out of thone available to me, knowing I wouldn't have access to or need the money, and let it rip. The results shaped my thoughts on letting good investments run. No worries.
     
  7. baudwalk

    baudwalk Senior Investor

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    Duplicate --------------
     
  8. Onionman

    Onionman Senior Investor

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    I think a lot of what's going on is standard market "noise" and market chatter. The China situation isn't something that's happened overnight, and Greece certainly isn't. But we are also in what I always see as one of the "noisest" reporting season periods - Q2. I haven't researched it but my guess is that Q2 and Q3 reporting seasons tend to throw up more market volatility than the other two reporting seasons.

    I'm not saying that it's an easy environment to invest in. But I think those newer to investing might be a bit shaken by some of the volatility. And that's even before talking about interest rate hikes, which really will be a whole new ball game.
     
  9. GeeCee

    GeeCee Member

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    The only people that really have anything to fear when these kind of things are reported are the people who weren't in for the long haul, anyway. I know that there are people who come in for the quick strike, but more than likely, that's going to bite you in the butt in the end. Markets fluctuate. That's what they do. The only people that get rich when they do fluctuate consistently are the brokers.
     
  10. petesede

    petesede Guest

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    Yeah, I am surprised that people are surprised about China. Two years ago we knew what they were doing when they drastically reduced the limits on Margins and lowered the maximum rate of interest that could be charged. A ton of people, all at the same time, suddenly had billions of margin money to invest in their stock market. That is the reason it doubled so quickly. It is over now, everyone is maxed out and normal market behavior is returning, and a lot of people are now maxed on margins and getting called.
     

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