Stock Prices Dropped: How This Affects Your Investments

by | Nov 15, 2008 | Asset Management

Don’t worry about “why” your investment is falling.

Focus on “what” instead.  What is happening now.

Don’t worry about “WHY”…everyone is doing that.  Gyrating stock prices are getting swung around by deceptive news headlines, faulty stories — all designed to play on your emotions.

Do we really NEED to know “why?”
If a chart is breaking down, giving sell signals, breaking the all-important support line, giving a relative strength sell signal, etc.  Does it really MATTER why?

No.  You should sell.

Everyone is searching for clues, answers, reasons WHY the market is falling or where/when the market will hit bottom.
How many times this week will you hear “The market is down today because _____ .”

Just remember, in most cases, they are guessing!

Financial stocks starting breaking down, giving massive sell signals in April-May 2007, nearly a full YEAR before Bear Stearns agreed to sell to JP Morgan for $2.00.  By the way, Bear Stearns broke support at $140/share (that’s $138 above the price they agreed to sell at).

And the point?
The point is that no one knew in the spring 2007 WHY stocks were collapsing — or how spectacular the meltdown would be.  They just were falling apart, period.  All the charts told us is that there were clearly far more sellers than buyers, and that supply was in control.   That was all we needed to see.

When there is too much supply (of anything), prices are heading lower.
You don’t need the “why.”
So…focus on “what”…like what IS happening now?

People seem to be preoccupied with “what will get the market moving again?”  and “when will the bottom be reached?”  SImply, when buyers outnumber sellers, prices WILL go up.  That’s economics 101.

But unfortunately that doesn’t sell newspapers.
By the way…we may have ALREADY put a bottom in place – a month ago!

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