A Recession? In the end it's all Bull!


by John Whitefoot - Date: 2007-03-30 - Word Count: 497 Share This!

If you listen carefully...you may be able to hear the big blue chip investors whispering nervously about the "R" word.

Across the U.S, sobering housing statistics are beginning to reflect the sharp slowdown over the past year.

U.S. home-price growth slowed during the second quarter from a year earlier in the sharpest three-month plunge on record, according to a government report that indicates this year's housing slump is deepening.

Does a slumping housing market really hurt the overall economy? Many sectors of the economy are affected by the housing market: appliances and furnishings, building materials, the finance industry. So...yes.

Said one market analyst, "We're 99% sure that we're going into a recession. A serious bear market is possible."

Perhaps, but, when it comes to penny stocks, there's always a bull market somewhere.

In late October 1929, Wall Street collapsed; on March 10, 2000, the NASDAQ hit an all-time high of 5132.52. Before, between and since, there have been many ups and down; some short and steep, others gradual and prolonged.

What is a bull market? A bull market is a prolonged rise in the prices of stocks, bonds or commodities, generally accompanied by feelings of economic optimism. Bull markets are characterized by high trading volume - everyone wants in when prices are rising.

One study I read noted that over the last half century, the average bull market has lasted 5.5 years.

What is a bear market? A bear market is the opposite of a bull market. Prices fall over a prolonged period of time. A bear market is usually brought on by worries that the economy will fall off.

Over the last half century, the average bear market has lasted 12 months.

The shortest bear market lasted for four months, between August and November 1987. But that baby bear ushered in the longest bull market; lasting more than 10 years.

Why is the prospect of a bear market not as daunting as it may sound? Because an economic slowdown means that while the market may be overvalued - - new investment opportunities will continue to pop up.

It may not be a penny stock picker's paradise, but the market certainly isn't devoid of bargains. You just need to look where others don't.

And looking for bargains is a lot easier than trying to time your trades to take advantage of the rise and fall of the market. Studies have shown that the biggest gains come on a handful of trading days.

Still, penny stock investors tend to be more speculative in their investing strategy than the average investor. But even penny stock speculators need to define their strategy.

Why yes, "buy-low sell-high" is great advice, but few can consistently rest their laurels on that pearl. Instead, you may want to consider a "stop-loss" or a "stop buy".

A "stop loss" is an order to sell when the price of the stock declines to, or below, a stated price. A "stop buy" is an order to buy a stock when the price rises to a certain level.

Because even a penny stock investor can never be too careful.

Related Tags: stocks, investing, investments, stock market, bull market, investors, penny stocks, penny stock, recession

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