The following article by John Nyaradi showed up recently on the MarketWatch website with this heading:
“Here comes Lehman 2.0: Two ‘Lehman events’ cloud the investment horizon.”
With Friday’s Federal government lawsuit against seventeen major banks and renewed dangers in Europe, global investors now face the potential peril of two ‘Lehman Events’ as we say goodbye to summer and slip into September. (source)
If you read the above article in its entirety you might get scared and be tempted to buy inverse ETFs at this stage of the market – which is a very reckless move. Emotionally, many people love to buy whatever is rising and to sell whatever is falling in price.
In our opinion the market is gathering bullish steam for a mid-term rally before the year end. Savvy traders and investors must act in advance of a trend change instead of waiting for confirmation. Here are four solid reasons why you should be bullish on stocks;
- The gloomy media coverage of the worldwide financial markets,
- Insiders betting heavily on stocks in the past few weeks
- The volatility index (VIX) closing at a high of 48.00 on August 8th, and again on September 12, 201 at almost 39. VIX has been forming lower highs
- An intense selling by amateurs cashing out of their retirement stock funds which is a great indication of the herd mentality panic
Generally extreme choppiness near a market bottom indicates that average investors are panicking and cannot bear the psychological pain of further losses and consequently, will sell. In addition most hedge fund managers, with a few exceptions, will also sell low at these levels. When the dust settles then the road will be clear for a solid bull run.