Crash or Correction?

Nowler · Jul 25, 2018

Been doing some thinking about my investment portfolio... particularly in regards to the downside risk in US equities.

40+% of my portfolio is in North American equities and since it's eyeing up some form of correction/crash I'm considering moving my money around. I could do with having a/listening to a discussion on the current state of US equities, and global equities really. The benefits of being a part of such a discussion should serve to increase my overall understanding.

I've attached a breakdown of the regions/sectors of my portfolio in case anyone wants to go the extra mile with helping me develop.

Obviously we cannot pinpoint the precise moment of the crash/Correction, but does anyone have any strong feelings of when it will likely come about? The implications it will have on the equities of other countries (perhaps in the context of my portfolio)?

Obviously every bubble needs to deflate.
So is it going to be a mere correction, or a straight up Crash? Personally, in my rookie opinion it's going to come back down to earth with a bang... some of the stuff ive been reading and graphs I've seen show expansion in the danger zone which in the past resulted in a crash within 12 months.

Currently am drip feeding my 100% equities portoflio, but I feel the risk outweighs reward. If we are in the danger zone and something to the downside is coming, then it's likely to go down FAR more than what it might go up. Therefore, I am considering putting 80% of my drip feed into my ISA cash in wait to capitalise on better prices after whatever is coming, and keeping 20% going into this equity portfolio, attempting to squeeze the most out of what's left in this expansion period.

Any thoughts on this? Opinions?

As always, any efforts are immensely appreciated!

tomorton · Jul 25, 2018

Statistically, most of the worst US stock market crashes don't come out of uptrends.

Now of course, it depends on how you define an uptrend, but viable exit signals for US equities would be when the major US indices print both price and 20EMA below their 50EMA. Its hard to picture an uptrend in which both price and the 20 are below the 50. We flirted with this through April and May but we are clear of the danger zone now (for now).

Nowler · Jul 26, 2018

tomorton said:
Statistically, most of the worst US stock market crashes don't come out of uptrends.

Now of course, it depends on how you define an uptrend, but viable exit signals for US equities would be when the major US indices print both price and 20EMA below their 50EMA. Its hard to picture an uptrend in which both price and the 20 are below the 50. We flirted with this through April and May but we are clear of the danger zone now (for now).

Thanks for the reply mate!
That I wasn't aware of, I'll cautiously keep my savings dripping in while I keep a close eye on what's going on.

Making money is so much easier when one has money.
All those thousands I wasted back in the day... smh

So...
Do you reckon it's correction won't be within the next 3-4 months?
Or do you have any opinion in that regards?

tomorton · Jul 27, 2018

I have absolutely no idea or expectation.

I keep reading how we're on the brink of a huge crash, but I've been reading that every year for 20 years. The simple 20/50 rules I posted would have got any trader out of US equities before the worst of the 1929 crash and most of the other bad ones since, so there's no justification for acting on a scare story.

NVP · Jul 27, 2018

don’t worry about it ....trade or invest with a solid strategy and good exit processes if needed

N

malaguti · Jul 27, 2018

Nowler said:
Been doing some thinking about my investment portfolio... particularly in regards to the downside risk in US equities.

40+% of my portfolio is in North American equities and since it's eyeing up some form of correction/crash I'm considering moving my money around. I could do with having a/listening to a discussion on the current state of US equities, and global equities really. The benefits of being a part of such a discussion should serve to increase my overall understanding.

I've attached a breakdown of the regions/sectors of my portfolio in case anyone wants to go the extra mile with helping me develop.

Obviously we cannot pinpoint the precise moment of the crash/Correction, but does anyone have any strong feelings of when it will likely come about? The implications it will have on the equities of other countries (perhaps in the context of my portfolio)?

Obviously every bubble needs to deflate.
So is it going to be a mere correction, or a straight up Crash? Personally, in my rookie opinion it's going to come back down to earth with a bang... some of the stuff ive been reading and graphs I've seen show expansion in the danger zone which in the past resulted in a crash within 12 months.

Currently am drip feeding my 100% equities portoflio, but I feel the risk outweighs reward. If we are in the danger zone and something to the downside is coming, then it's likely to go down FAR more than what it might go up. Therefore, I am considering putting 80% of my drip feed into my ISA cash in wait to capitalise on better prices after whatever is coming, and keeping 20% going into this equity portfolio, attempting to squeeze the most out of what's left in this expansion period.

Any thoughts on this? Opinions?

As always, any efforts are immensely appreciated!

I'd say we're all going to have different opinions on this one. what one person considers a mere blip on the landscape, others looking at smaller timescales will consider it a crash
An "estimate" is that a 10% drop from a high is a correction, whereas below 20% is a crash. these amounts haven't been wrong in the last 30 years that i can gather where a drop from a high below 20% didn't turn into a true bear market
a picture tells a better story..this is of the S&P where i have plotted a 20% drop from the high

Nowler · Jul 27, 2018

Cheers for the responses folks!

I definitely agree that views will contrast from person to person, though since I joined this forum I've found little gold nuggets (& A few big ones) from listening to everyone's opinion and then using it to form my own.

The 20/50 rule mentioned, and the 10/20% guideline are something's I'll leave this conversation looking out for. Though... both are technical indications... I need to build up my expertise of economic understanding if I want to see the subtle fundamental indications of impending danger.

At the moment what I'm working from is quite crude.
I am trying to keep in mind market cycles. That Is, short and long debt cycles that carry us from booms to busts... the consistent patterns we follow as creatures of habit.

I'm sure it will all come with time. This is my first time investing in stocks, so I'll have to walk before I run.

I need to work harder on my economic data understanding. That Is, understanding what is inferred when I hear a release and understanding it's potential implications and knock on effects

Crash or Correction?

Nowler

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tomorton

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Nowler

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tomorton

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NVP

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malaguti

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Nowler

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