Expert Reactions Before, During And After The Crash

Monday’s early session was a dramatic roller coaster; the S&P 500 futures were down nearly 100 points, while the Dow Jones Industrial Index sank over 1,000 points, representing one of the worst days in the financial markets since the crisis back in 2008.

Why?

The stock market crashed early in Monday’s session in response to China’s Shanghai Index falling 8.5 percent. China’s decline further impacts the United States, as growth worries continue to fester regarding the world’s second largest economy. China reported a drastic decrease in exports last month and surprised the world by devaluing their currency.

The prices of oil are also dragging the economy down as more and more producers keep pumping in oil. Saudi Arabia and other major oil suppliers continue to increase their supply of oil, furthering the decline. Oil prices are at a six-year low, trading at a price near $38.

Related Link: Black Monday, Part Deux: Dow Falls 1,000 Points, Several Blue Chips Halted

Expert Expected

In an exclusive interview with Benzinga, Ronnie Moas from Standpoint Research, Inc. stated that he has been patiently awaiting a market correction. Moas recommends investors to “gradually buy as the market is dipping.” He added that he believes Monday’s drop “may not be the bottom,” and he envisions the S&P 500 to reach 3,000 points over the next five to seven years. Ronnie predicts the S&P 500 to hit a range of 1,600 to 1,700 points during the same period. He concluded that he likes stocks with a relative strength index (RSI) under 15 as a buying opportunity and an RSI of over 85 as a selling opportunity.

Expert's Warning To Investors

In another exclusive interview, Dennis Dick, an independent trader and CFA, offered much insight into Monday’s rough morning. He noted that stop orders, orders to buy and sell a certain stock once a specific price target has been reached, had a big impact in the early trading session. When the market opened with an enormous fall, many trades were happening without the actual investor trading. Those who used stop orders to sell on Monday morning may well be kicking themselves as the Dow has rebounded nearly 650 points from its 1,000-point drop.

Dick also specified that panic selling was occurring for investors who feared for worse. The CFA named Monday’s drastic fall a “Liquidity Crisis.” He noted that prices were ridiculously low, specifically big companies such as General Electric Company GE, which had a harsh 19 percent fall. He also recognized that experienced traders and investors would know this kind of drop for such a massive company was not sustainable, and knew it would rebound, just as it did.

Dick concluded with what he called an “overhead supply worry.” He stated that investors who were looking for profits would now become fearful of the future. When investors notice a decline as dramatic as Monday morning, they tend to build a fear for future investing, and resist from further trading activities.

So, What Now?

Dick warned investors that they must stay patient and knowledgeable. He noted that the high volatility in U.S. markets is a correction and does not see interest rates hiking anytime soon, or at least in 2015. Dick envisions that the “buy the dip” theory is being punished by the new fear some investors are experiencing about future growths. He concluded that investors should be cautious and sharp, but not hesitant, when buying their stocks for the future.

Image Credit: Public Domain