The S&P 500, the NASDAQ, and the Small Cap Russell 2000 all took old-fashioned butt whipping today. Volume picked up from Friday on the S&P 500, the NASDAQ volume was about the same as Friday. And the Small Cap Russell 2000 just plainly got beat up. This is the correction I told you was coming. This is needed to confirm the previous market bottom on approximately August 4th. The easiest path for all three of these markets is lower now. I stated this would most likely happen after Labor Day. IT’S AFTER LABOR DAY! I believe the S&P 500 will correct lower somewhere in the area of 5,200–5,300 and the NASDAQ 16,100–16,300. Remember, I SAID THAT!
The NASDAQ is a wildcard, though. I expect some money to come out of this market and be reinvested into small-cap stocks. The Small Cap Russell 2000 is a basket case of a chart. It will get hit harder when the NASDAQ and S&P fall (over the next 1-2 months). But when the correction is over, most likely towards year-end (November-December), it should perform better than them on up days. Remember, I said that.
So why is this correction happening now, and how do I know?
Well, nobody ever knows for sure! Experience, human behavior, and thinking like an institutional money who understands economic trends help. Simply put, many things go into understanding what and how they think (institutional money managers). I will explain as much as I can as situations occur.
This particular situation has numerous reasons. Big hedge funds and institutional managers are taking huge profits (remember I said they get paid bonuses on gains, and many have a fiscal October to October fiscal year).
They locked in profits, and I would guess they are waiting to put a lot of that money back to work once this market corrects. Plus, this helps sidestep any future tax ramifications (30-day wash rule) in the future if they want to repurchase that security.
Next are the short players. They are shorting the big names that had big runs. The reason why? They are very short-term players, and they run a lower risk shorting now knowing big institutional buyers are sitting on the sidelines.
Why do I think big institutional buyers are sitting on the sidelines? UNCERTAINTY! That is the worst word in an institutional investor’s vocabulary. That uncertainty is the presidential election. Policies are different, which affects investment. The market performance difference is only about 1% between a Republican and a Democrat. But what to invest in is important based upon what the government is spending its money on. Thus the shorts currently have the upper hand. The short players will short if there is not any market movement. Economic reports are coming out and covered before the report hits. This creates a slowback and fills as the market corrects.
Make your buy list. I have several that I will add in the next 1-2 months. I believe money is made when you buy (at the right time).
Upstart
Corrected hard today as I said it would. Expect that type of correction to continue in the near term. The year-end is when this stock will really shine.