It Doesn’t Always Come Back

Today the S&P500 closed near support at 1850, which is my delineation between the likelihood of a Correction or a full blown Bear market (see:  https://www.investablewealth.com/correction-or-bear/   )

Have we reached a bottom and this is a good time to “buy the dip”?  I have no idea, but I do think it’s encouraging that the Russell2000 had better relative performance today and that the general indexes recovered significantly from their intra-day lows.  That may at least bode well for a short term “dead cat bounce” or short squeeze rally before the markets move lower…if they do.

At times like this, it’s important to dismiss the myths of- “it can’t go any lower” or “it will come back”.  Don’t get lulled into a false sense of security believing that any one stock (or sector) will rebound or recover in the near term.  There are many historic examples of stocks not recovering or moving sideways for great lengths of time.  This includes OIL, think back to the 1980 peak.  So be cautious trying to call a bottom.

Alcoa is a good example, note the below chart.

Alcoa is a blue chip stock, it has a proud history, pays a dividend, and has virtually no chance of going bankrupt…BUT…notice that it has never recovered from its nominal peak in 2007.  In fact, it’s down over 80% from that peak !

Confused about this market?  From a historical perspective, you might want to go back and review these episodes of the Wealthsteading Podcast:

12/1/14  #50- Reality of the strength of the US Dollar

http://www.wealthsteading.com/50

 

6/6/15  #116- Oil small fluctuation in supply (part 1)

http://www.wealthsteading.com/116

 

6/8/15  #117- Oil small fluctuation in supply (part 2)

http://www.wealthsteading.com/117

 

7/12/15  #124- China’s 3 strikes

http://www.wealthsteading.com/124

 

9/2/15  #133- What are you learning from this market correction?

http://www.wealthsteading.com/133

 

9/13/15  #138- Build watch list during market correction

http://www.wealthsteading.com/138

 

alcoa never recovered 160120

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