Weekend Reading: Is This The Big One?

Some month’s back I posted an article entitled “No One Rings A Bell At The Top” wherein I stated:

“The current levels of investor complacency are more usually associated with late-stage bull markets rather than the beginning of new ones. Of course, if you think about it, this only makes sense if you refer to the investor psychology chart above.

The point here is simple. The combined levels of bullish optimism, lack of concern about a possible market correction (don’t worry the Fed has the markets back), and rising levels of leverage in markets provide the ‘ingredients’ for a more severe market correction. However, it is important to understand that these ingredients by themselves are inert. It is because they are inert that they are quickly dismissed under the guise that ‘this time is different.’

Like a thermite reaction, when these relatively inert ingredients are ignited by a catalyst, they will burn extremely hot. Unfortunately, there is no way to know exactly what that catalyst will be or when it will occur. The problem for individuals is that they are trapped by the combustion an unable to extract themselves in time.”

Of course, what I didn’t realize at the time was that, on Thursday, the markets would plunge like a stone sending investors running for cover and the media scrambling for answers. What caused it? Is this THE correction? What happens now?

This weekend’s reading list is a collection of thoughts as to whether the current correction is just a buying opportunity, or whether this is Redd Foxx’s “Big One.”


Wallace Witkowski penned:One out of four stocks on the SP 500 Thursday are firmly in correction territory, or down 20% or more off their 52-week highs. At last count, 133 stocks on the index are bearish, according to FactSet data.”


Originally appeared at: http://davidstockmanscontracorner.com/weekend-reading-is-this-the-big-one/