SI boards are quiet, as they're usually are on days when the market melts down. As I write, Dow is down triple digits, and Nazz getting there as well. Volume is light, so it is probably a buyers strike rather than a capitulation of sellers. Probably every one is waiting for the sentiment to turn around before jumping in. What if no one buys on the dip? What if everyone waits for chart confirmation?
Human memory becomes less retentive when confronted with fear. We forget that only a few weeks ago the market was celebrating an easing Fed. The market turned around and, pierced right through the downtrend line. We were elated figuring the market has bottomed. Today, we are not so sure, not because the fundamentals have changed much, but because the market has suffered degradation, so have our feelings.
During a day like today, weak holders sell out so as to get rid of the the sickening feeling inside. They want to feel whole again to start anew, so they capitulate. Capitulation is often the wrong thing to do. Capitulation often turns to regret when the market springs backs. And spring back it can, as it has many times before, quickly and suddenly - or have we forgot? But there is never certainty when dealing with the market. It might be that today is an indication of a continuation of a bear market that is bigger and deeper than we initially thought.
So what to do if today is the start of a big, howling bear market? Well... this is where asset allocation comes in. If we had played stocks with playable money (and not with money needed to buy food and shelter), and if we had picked stocks intelligently, then there's not much to worry about. The world's not going to end. It is in the best shape ever in the history of humanity - advances in technology, medical, no big wars looming, lots of food and choices etc. Businesses will spring back and so will their stocks.
But, best of all, the game ain't over. We can still go short! |
