Is This a Correction… or a Crash?
Stocks are a bloodbath this morning.
To be fair, the market was EXTREMELY overbought going into this correction. So, we were MORE than due for a drop.
The most egregious stocks in terms of being overbought were tech stocks. This is where we’ll see the most severe drops. We bounced off support on Friday, but it’s highly likely we’ll work our way down to the lower blue line in the coming days.
Indeed, my own view is that we will NOT see a crash here. There are NO signs of a crash coming in the bond or the currency markets. This seems more to be about stocks working off their “sugar high” from all of the Fed interventions.
Tesla (TSLA) is the ultimate example of just how ridiculous things had gotten. It could almost HALVE and still maintain its bull market trendline (purple line). Again, this is a stock that ERUPTED higher in the last few months on ZERO fundamentals. The stock could drop a whopping 40%+ and still be in a bull market.
Again, I do NOT think the markets will crash. It will certainly FEEL like a crash for stocks like Tesla. But the broader markets will likely do something like this: A kind of choppy downtrend with bounces off support before we finally bottom sometime in early October.
Again, I do NOT think we will crash here. But we will see considerable volatility. And this is a trader’s paradise.
Why?
Because traders look for SHORT-term moves, not long-term trends.
I seek to identify short-term trends with my “lunchtime trades” recommendations — namely, find 2-hour profit windows that have the potential to pull profits from the market by lunch.
You’re in… and then out.
I recorded a demonstration of what this kind of strategy looks like.
Best Regards,
Graham Summers
Editor, Money & Crisis
