26.10 - NASDAQ faces the lowest level in 7 years
- by Anna K.
Tech stocks are down, bear market is up.
Panic. It is one of the worst things that can happen in the markets and to traders in general. But unfortunately at this point it is next to impossible for us to escape panic as we look at the major stocks and indices falling down to the lowest levels in years. Of course our mind goes towards sell off immediately. But as we know it is hardly an answer at this point. It cannot help us and neither can it improve the situation. But what is really happening?
Well, for starters it is worth mentioning that yesterday’s decline was impossible to miss and that it caused a lot of panic. Is it time for bears in the markets? Is it one of the signs of the oncoming financial crisis? What was it caused by and when will it stop or at least slow down? Well, our guess is that volatility in the markets as well as traders being tired of waiting and constant strain were the main reason for the fall.
The decline in its turn became a horror for the tech stock in the United States. With major companies like Google, Amazon and Microsoft losing share prices we can see NASDAQ Index going lower than it has been in about 7 years. And that is when you know that the situation has gone out of control.
Declines in the tech stocks of the United States can be explained by underwhelming quarter performance by the companies. Most of the have missed the quarter prediction for the earnings which really disappointed traders who didn’t want to have anything to do with underperforming stocks in the time when bears start replacing decade-old bulls. Right now we need something that will sure be profitable and simple. We are simply too tired from being strained all the time.
Although here we have to ask ourselves whether we are to expect the greenback to follow the stocks. And the answer is likely to be “no”. The fall, although pretty scary is still not nearly strong enough in order to damage US consumers’ confidence in national currency.
So, at least USD traders can expect to see some kind of stability in the current situation. after all, underperforming of the stocks has little to so with the economy as a whole. After all, if the two were so strongly tied together we would see the greenback flat on the floor yesterday. But in reality only 0.1 percent was lost against the six major currencies. Plus, it was rapidly recovered today, so at least here we have nothing to worry about.
Bears and bulls – eternal fight of two markets that we are able to see right now. Bulls are pulling the markets ahead and bears are trying to stall and even reverse the growth. That happens, for example, for the same reason it is happening today – when the bull market simply runs out of steam. And now we have to wait for the power to be gained again, although it is not an easy task in present condition.
So, we are now tasked with a difficult question – what are we to do and how are we supposed to act in the conditions of the bear market? The most obvious answer in wait. Markets are always going in circles in any case and bulls will eventually return. But there is a simply ‘but’ in this situation – but we have to somehow trade now.
Watching the markets even more close is a step number one. Traders’ vision really comes in handy here. Spotting the companies that are going to have noticeable growth in any situation is a real art in conditions of a bear market. Also what is most important is to stay away from the assets and instruments that are clearly failing. And yes, we understand the logic of holding onto the shares that were performing perfectly in the conditions of the bull market with hopes that it is just a two-day-phase, but after a week of falling it might be time to let go. Of course right now we haven’t really crossed this line, so do not rush into the selloff, but at the end of the next trading week the situation is going to be much more clear and we are going to see more of the real situation.
There is also a scenario of holding onto your failing shares but that is only the case for those who are prepared to really long them. Like for years at a time. Think for yourself. In case we are looking at a year-long bear market it is possible that we are going to have to endure more falls from, let’s say Apple shares. but it is a major stock and there is no doubt that sooner or later we are going to see a mass recovery. It may happen in a year or six months, but holding onto the shares like that requires real patience.
What can be done right now? When everything is falling? The real problem is bot the selloff in the tech sector, although that is a major nerve-wrecker right now is not the only issue for us as traders. the real problem is the fact that falling tech stocks take down other assets. Like oil, for example. The crude has been on the downside for some time now, but even though we saw a brief moment of recovery yesterday it is nowhere to be seen today.
While bears are still pretty sleepy it a god chance to buy stocks you always wanted at the lower price, but caution must be exercised here at all times. And, as we have already said, longing is the only acceptable strategy in conditions of a bear market.