Tuesday, September 1, 2015

Correction! (In the market, that is)

This month I had the first buy signal in the buy/sell advice column since 2009.  Now, granted, the amount of the advice was a very small amount, and it would have to get up around 10 times what it is to actually have me buy some stock.  AIM has buffers in place to keep you from getting in before the market gets near its low.  Even when it does tell you to put in an order, there's no guarantee that the market has bottomed out.  If the rules are followed, though, a load of stock will have been bought at the cheapest prices of the stock, historically.  Also, the 'only put in one order max a month' rule keeps the trader from spending all his or her cash before the market starts heading back up.  Fortunately, history tells us that down trends are much faster than up-trends.  That means that with AIM, there will always be more than enough cash to buy stocks at bargain-basement prices.  There have been a few who have figured out modifications to the formula that keep the trader from accumulating too much cash in an extended bull market.  I've looked at those and find them to be still very conservative and fit within the parameters that the original inventor of this method likely would have approved.

      It's very likely that this is just a correction and the market may continue its run for a while longer.  I would have to guess that, at the very least, this is a sign that something big is coming up in the not-to-distant future, in the way of a catastrophic market move.  Fortunately, I don't have to guess about these things, and no one knows for sure what is going to happen.  All I know is, the thing won't go up forever, and what happened last week is almost always one of two things:  the beginning of a larger down-swing, or a foreshadow of very rough waters ahead.

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