On Monday, my new friend Scarlett Fakhar from Fox 26 came to visit me during my radio show broadcast to discuss the market rout and the what investors should be doing now.
Following Monday’s sell-off, the markets were unable to gain any traction yesterday. The lack of a rebound suggests that market dynamics still remain extremely weak.
As discussed yesterday, there is critical support sitting just below the market currently. If that support fails to hold by the close of trading of Friday, there is likely to be an acceleration to the downside.
Importantly, as I discussed in the interview with Scarlett, what investors need to remember is that after 6-years of a bull market advance, the risk of a correction has risen markedly. Given that roughly 95% of any bull market advance is simply making up previous losses, maybe investors should consider trying to avoid some of the losses before they occur.
As Chuck Prince, former head of Citigroup, said,
“As long as the music is playing, you’ve got to get up and dance. We are still dancing.”
The thing the majority of investors tend to forget is that eventually the music stops playing. It is when everyone stops dancing that the tipping point is reached. When the trend is reversed, from bullish to bearish, the market action becomes self-reinforcing in the opposite direction.
As I state in the interview, the problem for most investors who are chasing market returns is most won’t realize the music has stopped playing. For most, the issue of spending the next bull market making up losses, yet again, will leave many far short of the retirement goals they had hoped for.
Lance Roberts is a Chief Portfolio Strategist/Economist for Clarity Financial. He is also the host of “The Lance Roberts Show” and Chief Editor of the “Real Investment Advice” website and author of “Real Investment Daily” blog and “Real Investment Report“. Follow Lance on Facebook, Twitter and Linked-In