don't be the DUMB MONEY CASH IN ON THE CRASH Here’s another way to think of it...
H ow quickly individual investors forget that stocks go up and down. The famous Dow Jones Industrial Average stock index hit a new all-time high in early October. A week later, the Dow fell more than 800 points. It fell another 500 points the next day. All in all, we had a nearly 1,400-point decline (or a 5%-plus fall) in just two days. I get it – that scared folks. But you’ve got to understand something... Volatility is part of a “Melt Up” in stocks. You can’t have one without the other. You need
If a market has the potential to jump 100% in a year, then of course it can fall 10% along the way. That’s simply how Melt Ups work. It’s the nature of what’s going on right now. Don’t just take my word for it, though... Let me show you. In the final 12 months of the dot-com boom, the Nasdaq fell by roughly 10% or more – five separate times. Take a look at the chart below... As you can see, the last Melt Up was not a one-way move higher.
By Dr. Steve Sjuggerud
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to expect big ups – and big downs (even bigger than we recently experienced) – in the coming months. This should make intuitive sense... After all, a Melt Up is the final blow-off top of a long-term bull market. It’s the glorious, unadulterated boom before the next bust arrives. For this to happen, by definition, prices have to move – a lot.
Nasdaq Composite Index
5,200
4,700
-9.8%
4,200
3,700
The Nasdaq fell 10% five times during the last Melt Up
3,200
-13.1%
-10.2%
-10.4%
2,700
2,200
-9.7%
1,700
Jul
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1999
Mar
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Jul
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2000
Mar
S&P 500 CAPE Ratio 1918-1996
American Consequences 17
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