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posted on 14 February 2018

The Anatomy Of The Market Plunge And What's Next

by Sam Seiden, Online Trading Academy

Online Trading Academy Article of the Week

What Happened with the Dow?

Last week the stock market has gave up gains going back to November 1st. The S&P at one time last Wednesday (February 7) was down 8% from its record high in January and ultimately hit an intraday low more than 10% lower.


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While the markets are likely to rebound a bit in the near term (and are doing so this week), we just got a small glimpse of the damage that is possible and likely coming. The only question that matters… Can your accounts and retirement plan handle a major market decline and if not, what’s your plan?

Can We Expect Further Declines in the Market?

The markets plunged on relatively no news which means if and when we do get the next unexpected negative news, expect a much larger market decline. The fact that market prices declined to the lows that they did tells us there is little demand for stocks above those levels.

OTA Issued Warning Days Before the Plunge

On February 4th, Online Trading Academy issued a warning to members that a major market decline was likely. As seen on the charts below, following OTA’s patented core strategy we were able to determine that Supply greatly exceeded Demand in the S&P; major banks were heavy sellers at 2760 in the S&P. On Feb 5th, price rallies to our predetermined Supply level and the markets plunge from there. As you can see, knowing how to identify supply and demand on a price chart can help you protect your investments, even when the market plunges this dramatically.

How to survive a stock market crash.

A Retirement Savings Solution: Market Gains without Market Risk

Starting on the Wall Street side of the business, I learned exactly how Wall Street invests their own money which opened my eyes to simple yet powerful strategies. One that I utilize and teach our Online Trading Academy members is the Bond Strategy. The strategy offers stock market gains without any stock market risk to your investment capital. Instead of your investment capital sitting in the stock market with all the risk and fees, put it in one of three very safe, short maturity and high yielding bond funds. We then use the monthly interest payments to enter directional positions in the stock market. In other words, you’re able to take advantage of stock market gains without stock market risk. This is one of the many simple strategies Wall Street firms use for their capital, are you?

Participating in stock market gains without exposure to stock market risk is key for your retirement savings. Like anything in life, if you don’t take care of the risk, the risk will take care of you. Since 2000 through, this strategy has averaged an annual rate of return of just over 9%, while the S&P 500 index has averaged 3.2%. How can this be? Simple… you don’t participate in the losses. People don’t realize how devastating losses and down years are to their retirement savings or the true impact of having to make up those losses. It’s the single biggest risk to your nest egg and the most overlooked, until markets crash. This is why most people you know never enjoy the retirement they spent a lifetime dreaming of.

How to prepare for a stock market crash.

The Benefits of Market Timing

Have a simple rules-based strategy that helps you forecast major market turning points in advance, like we did above in the S&P and Dow. This allows you to both protect market gains and also profit from a down market.

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