Transcendental Market Truths:
The Market:
One of the possibilities here is that the market would break a support line and then crawl back up to it from the underside before giving up the ghost to the downside. That's still a possibility, especially if the smart money is finished disabusing the bulls of their profits and shares this week.
The best time to sell is after the bidirectional volatility dies down and the market starts to trend. Until it starts to trend, one will have the danger of whiplash in one's positions. I prefer just sitting in a swing trade in the direction of the major trend. That shouldn't be long - the market might have started it yesterday, but I won't know for sure until I see what kind of reaction the market gets off this decline. The fact that the top-down Dow money flow was mostly tepid yesterday argues that the smart money was using this decline to test the waters. They may want to see just how many buyers they can entice to buy the dip.
If this is anything like the 1987 top, then I could see a sharp price rally on very poor breadth. In 1987, the initial decline into September was followed by a huge rebound in the Dow on very poor breadth into early October. That rebound carried the Dow to within 90 points of the all-time high and certainly must have scared not a few shorts into covering just when they should have been adding to their shorts for the coming crash. So, one thing I need to watch for is a pronounced weakening in breadth on the rebound attempt.
Money is hiding in dividend paying stocks, such as the Utilities.
As far as short term market direction, yesterday's decline probably is the bulk of the point losses the market is going to see, but the market could continue to probe lower lows - the pattern suggests a few points lower before the bargain hunters bid prices back up the slippery slope again.
I can't guarantee the market isn't going to crash right now, but the odds are more favorable for a crash in the next few months, after August 26.
PS I was stopped out of my Dow long yesterday for a 10% profit and am currently 90% in cash, 10% in TLT.
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