by Jeffrey D Saut
Financial Sense
The markets (any market) are seldom surprised by shocking events. But during those rare instances when a surprise catches the market a panic may result. My definition of a panic is this:
A panic is a collapse (triggered by fear and unforeseen circumstances) which causes the price of the item to fall precipitously within a short span of time. That’s a loose definition, but it will do.
We’ve had a few waves of panic declines in the markets over the last few years. Panics is especially interesting for one reason. The reason is this: The surest action in the markets is the recovery following a panic. It is almost a rule (if anything in the markets can be called a rule) following a panic, there will be an advance that will recover roughly one-half of the price lost during the panic. This applies to individual stocks, to commodities, to indices, and to the averages.