Feel the Fear … then Profit From It
Courtesy of Paul Price at Guru Focus
Get rational before reacting rashly.
It was a painful week for anybody who owned stocks. Instead of a Happy New Year, we were treated to the worst beginning ever, with the S&P 500 dropping 6.2%. Jan. 4 to 8 also marked the market’s largest weekly plunge in almost four and a half years.
The Wall Street Journal showed that, historically, five days don’t equal a year. Three of the four most recent "first five days" annual returns showed little correlation with the Stock Traders’ Almanac’s well-known January Barometer, which states “As the first five trading days go, so goes the year.”
Should the “worst week since 2011” make you want to unload stocks at much lower prices than just days earlier? Did it provide a wonderful chance to load up on bargains? Only time will tell.
We can certainly go to the tape to see what followed the scary sell-off, which troughed on Aug. 9 that year.
In retrospect, that moment proved to be a great entry point for those with the guts to buy when the mood was bleakest. By Dec. 31, 2012, the S&P 500 ETF (SPY) had climbed 29.1% plus dividends from its Aug. 9, 2011 intraday low of $110.27.
