Are you concerned about volatility in the stock market? With the bull market turning nine years old this spring, you can expect more.

There is a sensible approach for these times. Every investor should consider it. To understand the approach, let us start with two charts.

Two charts

Please click here for annotated chart of the stock market when it was recently in the middle of a violent correction. The chart was published on Feb. 9 when the stock market was looking downright scary to many investors. The chart shows two scenarios. At that time, The Arora Report said: “The probability of a bullish W pattern forming is significantly higher than a bearish break.” For more analysis of the chart, please see “Stock market patterns suggest bullishness will triumph over bearishness.”

Please click here to see how the W bullish pattern has evolved. The chart also shows The Arora Report calls, as provided in real time to The Arora Report subscribers.

The charts are of S&P 500 futures ESH8.  Similar conclusions can be drawn from popular ETFs such as S&P 500 ETF SPY,  Nasdaq 100 ETF QQQ, and small-cap ETF IWM. It is more instructive to use a futures chart because futures trade overnight and there is a very important point on the chart that is visible only on that chart.

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

A sensible approach

Here are some, but not all, simple ingredients of a sensible approach that every investor should consider.

• When there is risk in the markets, hold an adequate level of cash. Cash not only protects you when the market falls, it enables you to invest in new opportunities at better prices…..Read more at MarketWatch.


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