Tuesday, September 01, 2015

China Woes Drag US Markets Sharply Lower

Stocks have plunged again, continuing a rocky ride for Wall Street, after gloomy economic data out of China rekindled fears that the world's second-largest economy is slowing more than previously anticipated.

Here come the algos and the high speed computer traders! Look like we back and filled the gaps of last week. Time to make some new lows if those of last week don't hold!

The problem for bulls in an early bear market, is that they don't recognize the difference between a correction of an overbought condition that ultimately moves to new highs and a full fledged decline with lower lows punctuated by sharp oversold bounces.

If China is really the new leading indicator, Chinese stocks still sport P/E's of ~40, down from around 70. Still a long way to go by U.S. stock indices standards.

Timing the market may be tough, but there is absolutely no reason why anyone should sustain paper losses of 20% or more because of inertia or dividends. What good is a 4%-5% dividend if your equity is down +/- 20%? How do you know if things get really dicey, the dividend doesn't get cut?

By the time you see price action indicating that might be a possibility, you will be sitting on quite a loss.

A word to the wise. If you want to make big money in the market, you have to work at it diligently.

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