U.S. stocks had their worst week in over three years last week – falling 3.5%.
You couldn’t have missed that – it was all over the financial news.
Is this massive fall in one week the sign of the end? Is this the peak of the great bull market? Is it time to worry?
In short, no.
Instead, history tells us we should buy this dip. Let me explain…
[ad#Google Adsense 336×280-IA]Something extremely unique has happened in the stock market in the last two weeks…
It’s only happened twelve times since 1928.
Importantly, in 11 out of 12 instances, stocks were higher 20 weeks later – with an average gain of 5.9%.
This is according to Jason Goepfert of SentimenTrader.com – who does excellent work.
So what is this unique thing that happened?
Stocks hit a multiyear high two weeks ago – and then closed at a six-week low one week later.
After such a bad week, investors have panicked a bit. When investors see an all-time high, followed by a terrible week, they typically get nervous… quickly.
History tells us that we shouldn’t get nervous…
In hindsight, out of all 12 previous instances, this market action signaled a peak just once – and when that happened, I wasn’t even born yet. (It happened in February of 1966.)
Jason Goepfert says, “Other than that [1966 instance], any further weakness [in the market] was limited and temporary.”
After the worst week in three years, investors are now worried.
Don’t join them. Instead, use their worry as a buying opportunity.
Good investing,
Steve
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Source: Daily Wealth