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Dramatic Stock Action: "No Time to Get Out"

Even stocks from "conservative" sectors can severely hurt your portfolio -- quickly

by Bob Stokes
Updated: January 24, 2019

Despite the jump in volatility in Q4 2018, stock market optimism remains nearly elevated as ever.

This Jan. 17 Marketwatch headline captures the sentiment:

Head of world's largest asset manager says stock market has hit a bottom

Of course, only time will tell if this opinion proves correct.

But, with all this positive sentiment, EWI believes it's prudent to remind ourselves how quickly bear market action can take over. Not only in the indexes, but with individual stocks too, even ones that are constituents of "conservative" sectors, like utilities.

This is from CNBC (Jan. 14):


PG&E Corp. stock cratered Jan. 14 after the company said it will file for Chapter 11 bankruptcy protection amid the financial anguish stemming from its part in helping spark a wave of historic wildfires in California.

Shares of the company plunged 52 percent.

Again, this was a single day's market action.

And, on Jan. 17, a group of Hong Kong-listed stocks had an even larger single-day percentage decline.

The just-published January Elliott Wave Theorist has a section titled "Elliott Waves and Crash Risk," which includes this "article [excerpt] by Business Insider, condensed from a Jan. 17 Bloomberg article, from which the table is taken":


As you can see, the title of the table is:

A bunch of stocks in Hong Kong crashed 70% without warning -- and no one really knows why

The table shows one of the securities hardest hit and the condensed Business Insider article says:

The stock price of several Hong Kong-listed companies plunged during trading [Jan. 17], leaving investors and analysts baffled as to what caused the sudden plunge. ..

Analysts so far have been at a loss to explain the sudden crash, which started between 2.00 p.m. and 3.00 p.m. Hong Kong time.

"No one really knows what's going on here," [said the head of research for an Asian investment firm]. "For common investors, it's a very surprising and tough situation as there was no time to get out."

When a powerful Elliott wave unfolds, it usually catches most investors by surprise.

The good news is, these waves aren't random. They follow a pattern, which makes them predictable, in terms of probabilities.

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"Survive and Prosper!" -- The Goal of Any Sound Investment Strategy

Yet … for many investors, "strategy" simply means diversify across asset classes. For example: 40% stocks, 40% bonds, 10% gold and 10% cash (of course, the percentages can vary).

Many financial advisors would consider the above percentage breakdown as only moderately risky, even conservative.

EWI vehemently disagrees!

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