Ok, I’ve got to admit it. Some of these pullbacks in stocks on my watch list are getting appealing as investments. And, I’m guessing that many active investors are either already full-in on some of their favorite stocks or beginning to make purchases for the longer-term.
That said, short-term trading is one thing, while investing for longer term is another. And I see a few problems with jumping head-first into stocks for the ‘long haul’ right now.
Here are five of them:
1. Â The stocks I want to own MOST haven’t really been hit yet.
2. Â Leading momentum stocks can get hit for 40-70% losses. Maybe some of the fundamental ideas we like have run their course (stale or flawed) and the appealing 20-30% corrections can get much worse.
3. Â Market breadth figures aren’t at ‘obvious’ meaningful bottom levels.
S&P 500 – % stocks trading above 200 day moving average
4. Â Everybody still sees the appeal in buying every dip. Haven’t seen much “throw in the towel” investor sentiment.
5. Â The near to intermediate term outlook of earnings is not improving and possibly still worsening.
This correction needs time, at the very least, to work itself out. Â I’m not ‘sure’ of much in the markets, but this is clearly a period of vulnerability in stocks. Patience will pay as this bear market plays out. Remember, stock market bottoms form when smart investors step in and traders are sick and tired of buying weakness.
Thanks for reading! Â Trade ’em well!
Read more from Aaron on his blog.
Twitter: Â @ATMcharts
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
