9/29/08 Update: Another big panic today with the Dow closing down 777 for its biggest one day drop EVER! There is fear absolutely everywhere!
The stock market is at a two year low right now and there has been nothing but pain this year. Yesterday the US Dow Jones went down over 500 points which was it's biggest drop since 9/11 and it has transfered over to the International markets as well.
There is no doubt that this stock market panic is the real thing as company after company comes in with low earings or warnings about slowdowns and lower earnings to come. As I right this, the market has come back a little as it was down over 130 but is now up 50 points or so.
If you sell now in September 2008 you will be part of the panic and contributing to it. You will probably be getting the lowest price for your stock as many stocks are at a 52 week low. However, if you don't sell, things might get worse and you may lose more money. It seems selling could be wrong and holding could be wrong. Alas, these are difficult times for stock market beginners and veterans alike.
If you look at the 2008 Dow Jones stock market chart below, you will see that everytime there appears to be an upturn, it ends up heading back down to a lower point. Yesterday's drop was all out panic as people just wanted out. Some people have bigger balls than others and then some people may be smarter than others too. We will only know in the future when we get there.
Is it time to be buying right now in the midst of this panic? This is where the pro's seperate themselves from the stock market dummies and beginners. The pro's have a plan and they have lots of information as well. That doesn't mean that the professionals will be correct whatever they do, but it does mean that they have a better chance of understanding the market and the sentiment of investors.
For stock market dummies and the average stock market investor, it is extremely difficult to see and understand when the stock market might be approaching its low point. A panic in the stock market is often a good time to pick up a few stocks at an oversold low price and the professionals are good at that because they have the fundamentals in front of them and can more easily estimate a companies true worth. If in a stock market panic sell off a company gets oversold by frightened investors, the hedge fund managers and stock traders may be the ones buying the stock.
Again, there is no way to tell the future and today may have been the stock market low point or it may come sometime in the coming weeks or months. There is still panic in the air and another bad company story may be right around the corner to send the stock market lower. However, we do know that at some point there will be a turn around in the stock market. It may not reverse on a dime and head right back up, but it will turn around in some fashion. At some point we will have all wished we had started buying stocks rather than sitting on our hands and doing nothing. Is that time now? Is it time to start looking for stocks to buy rather than stocks to sell?