Get Ready For The Next Bull Market

| October 4, 2011

It’s tough to be bullish on anything right now…

The S&P 500 has fallen 19% since its April 29th high.  A 20% drop signifies the start of a bear market…

Who wants to own stocks at the beginning of bear market?  I know, I don’t!

Right now, it obvious the market wants to move lower.

Over the last week, anytime the markets have mustered any bullish momentum, sellers have swooped in to sell into the rally.  This is a clear indication investors are taking any and every opportunity to get out of stocks.

If you’re a short term trader, there’s really no reason to be long this market.

The bottom line is Greece and Europe are driving the bus.  And European markets are dragging U.S. stocks down with them.  In other words, Greece is holding the markets hostage.

The way I see it, Greece is now in a death spiral.  Yesterday, Greece said it will miss deficit reduction targets agreed to as part of its bailout deal.  They’re locked in a vicious cycle where they have to borrow more and more money to pay the interest on their existing debts.

There’s a name for people, businesses, and countries that can’t pay their bills. Broke, busted, insolvent, bankrupt… you get the idea.

Simply put, the math for a Greek bailout just doesn’t work.

And just like when an individual or business is insolvent, Greece should be allowed to default on their debts.  And it should be done sooner rather than later.  If not for Greece’s sake… it should be done for the rest of world.

I’m tired of being held hostage by the fear and uncertainty the situation is creating. But until it’s done, it’s too risky to own stocks. For all I know, when Greece defaults it will trigger another credit crisis.

2008’s credit crisis is still fresh in my mind.  I remember Ben Bernanke reassuring investors the fallout from defaulting sub-prime mortgages was “contained”.  And we all know how that worked out!

It’s easy to see why it’s much better to allow Greece to default now.  The sooner the inevitable happens, the quicker we can we move on.  Until then, stocks will likely continue to move lower.

However, it’s not just Europe… The US economy is slowing toward recession.  And China could be in even worse shape than the US.

Here’s the thing… This crisis will pass.

Whether it happens today, tomorrow, next week, or next year is in the hands of European leaders.  But eventually, it will pass.

What I’m leading up to is this –

Now’s the time to put together a shopping list of stocks you’d like to own.

Once this crisis is over, stocks will be cheap.  And you’ll be able to pick up some of the best run companies in the world at a huge discount.

But don’t get in a hurry… right now, most economists still think the US economy will continue growing.  They’re not forecasting a recession yet. But at this point, I don’t think there’s any way we’ll avoid a recession in the US.

That means economists still have a long way to go with their downward GDP revisions.  And the further they cut, the lower stocks are going to fall.

Eventually, we’ll reach a capitulation point.  Most retail investors will throw in the towel and just about everyone will be bearish on stocks.

That’s when you can swoop in and pick up stocks at dirt cheap prices. Until then, keep your powder dry and use the time to put together a list of stocks you want to own when the next bull market kicks off!

Tags: , , ,

Category: Stocks

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets on a daily basis. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

Comments are closed.