#6 - Market Corrections a The Myth Of A Healthy Pull-Back
Really quickly today… I know I'm whispering because I'm up very early and my kids are still sleeping and it's like 4:30 in the morning here. But I was listening last night to somebody on the news talk about… My wife watches the regular news during the evening and they had somebody on talking about the markets and the fact that stocks were pulling back and this person said, "Oh well, you know this market needs a healthy pullback of 5% or 10%." I'm thinking to myself like, "What the heck is a healthy pullback?" If a market is strong and if the market is strong, it shouldn't pullback. We should have ebbs and flows every day, a little bit of buying, a little bit of selling here. Of course, that's healthy. We don't want everyone just buying up everything. But in a healthy market, there's no such thing as a healthy pullback. I'm just totally baffled by that comment and don't think that it's actually realistic. I don't think that if markets are healthy, they just randomly pullback 10%. 10% is a pretty significant drop. Now of course, this is the broad markets and little stocks and ETFs and things like that, we often see runs of 5% here, then a 2% drop. That's just trading. That's just people reaching new levels of support and resistance, new levels of demand and supply in the market and I think that that's the ebbs and flows that the market goes through. But to say that any market deserves a healthy pullback is I think in my opinion just not realistic. I think market corrections show us something. They show us cracks in the foundation, if you will that the market maybe is starting to roll over or maybe starting to change or the direction or trend are starting to change. I want to add that in here today because I thought it was a ridiculous comment that "Oh, we're due for a healthy 10% pullback." and I think many people would really enjoy that although I would because if we do have a 10% pull back, that means that implied volatility is probably through the roof and we can sell a bunch of options.