Down But Not Out

Today’s selloff shouldn’t come as a huge surprise given the negative underpinnings I wrote about yesterday.  The market took some bad economic news this morning and ran with it.  Combine the weak retail sales with the government discussing national healthcare and you have sell orders pile up.  Three weeks ago, this same news would have caused a rally because it would have been spun in a positive way.  It’s about the mood of investors and right now, we’re extended and investors are looking for every reason to sell.  It’s all technical. 

Given the nastiness of today’s pullback though, if you’re a bull, you still may be ok.  We haven’t really broken the uptrend that we’ve enjoyed since March 9th, but boy we’re close.  And if you are a bull and don’t have your sell strategies in place, you’re crazy.

I was chastized on television today because I had the audacity to say if we were to test the lows of March 9th, it would be painful.  I didn’t say we would or even that I expect it.  Nobody expects that’s a possibility.  But, I know a lot of technicians and long-term bulls who would welcome a test in order to start a real long-term bull market.  That would mean a fall of 35%+ for the equity markets.  I honestly don’t think that will happen.  But, what if we give back have of this rally’s gains?  Would you want to participate in a 17% pullback for the indices meaning many stocks would be down 25%+?  I wouldn’t.  But, that’s a real possibility.  Apparently, I’m the only one who thinks that’s possible.  That could be a sell sign in and of itself.

Even though there is some improvement in the economy and various risk indicators, we’re not out of the woods and the market may have priced in that good news already.  The strategy remains to prepare for a major sell off but be flexible to buy if it’s only a minor sell off.  Sounds easy enough, eh?  Yeah, right.  It’s not going to be easy but really investing hasn’t been easy since March 10th, 2000 (the peak of the 20-year bull market).

If you stay disciplined, open minded, and prepared, day’s like today don’t bother you, you enjoy them and embrace them.

Don’t forget to tune in to CNBC Asia tonight as I’ll be on from 6:10-6:30 p.m. CST.

This post published at

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