Is the Stock Market Comeback FINISHED?

It’s not always about how stocks act, but how they react that counts…

That’s what we’re looking for in the markets right now after some much-needed profit taking tanked the Nasdaq toward a quick correction. I know big market unwinds tend to spook investors. But it’s healthy action!

Yes, the Nasdaq dropped 10% in just three trading days. But we have to keep this move in perspective. Remember, the Nasdaq had gained an eye-popping 75% off its lows. Slipping double-digits following a profit-taking pullback is far from catastrophic. Plus, the VIX failed to make higher highs following the initial volatility spike that occurred at the onset of the pullback.

Despite the recent weakness in the markets, we’re still in an uptrend. Anyone who has tried to pick “the top” over the past decade has failed. I’m more inclined to look at the risk-reward and find opportunities after a selloff, as opposed to selling into this corrective move.

Check out more of my thoughts on this correction that I shared on this week’s TV appearance, including details on how central banks could continue to fuel the comeback rally into the fourth quarter:

 

Keep it In the Money,

Alan Knuckman

Alan Knuckman
Editor, In-The-Money

Chart of the Day: The market gets some relief…

Greg Guenthner

A relief rally is brewing this week…

Stocks snapped out of their collective stupor and climbed out of the abyss Wednesday, with the worst-hit Nasdaq names leading the charge.

By the end of the day, the Nasdaq gained 2.7%. The S&P posted a gain of little more than 2%. The Dow gained 1.6%. We did see some selling during the final 15 minutes of trade, which could mean that the herd isn’t completely sold on this rally. Perhaps we have more volatility ahead as the market attempts to relieve some of the excessive bullishness built up over the summer.

Thursday’s action confirmed these suspicions. After gapping higher, the averages slowly sunk into the red by the afternoon. The 3,400 level looks like it could become an important resistance level if this move holds:

spx

One of the keys to consistent trading gains is how you react to the quick selloffs like we just experienced.

Almost anyone can make money on the way UP. But can you hold onto it when the swift corrections come calling? Having the foresight to raise cash when the market is getting frothy can set you up for a stellar year. If your equity curve is flat while passive investors are losing money on the way down, you’re going to come out on top in the long run.

— Greg Guenthner

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Alan Knuckman

Alan hails from the home of options trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT). Beginning with his days on the floor, Alan’s worked with all aspects of the options markets for the past 25+ years.

Transitioning from a clerk to a floor...

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