Market bloodshed was the only way to describe today as the market reacted to the new AA+ debt rating for the US. Days like today prove why trying to catch a falling knife, which in this case is a market crash, is no game for the faint of heart. Cash was king back in July, last week, and remains king today.
Market crashes are unpredictable and serve as a cause for major caution. Unless your portfolio was aligned properly heading into it, selling or adjusting now is harder than ever with extreme volatility alongside knowing that a bounce is inevitably going to take place.
Mostly all technical analysis is useless during these times and the best place to be is cash. Contrarian investors who went short this market weeks ago (I’ve personally been 100% cash) are now seeing some significant unrealized gains, but knowing when to take profits remains a tough challenge.
More than ever, discipline reigns supreme. I hope this market isn’t beating you up too bad, and for those who are not in cash, stay frosty out there!
Update: SentimenTrader reports, “…breadth on the NYSE is skewed to the downside to a historic degree (fewer than 2% of stocks are positive on the day). Only 5/13/40 and 5/21/40 had fewer up stocks as a percentage of total stocks than today does. Yes, it’s been 70 years since it has been this bad.” Jason then later suggests that he is 95% confident Tuesday will be the bottom of the market for atleast the rest of August. Let’s hope he is right.
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Down | Down | Down |
| Intermediate | Down | Down | Down |
| Short-term | Down | Down | Down |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.