So, I was wrong. Yesterday, I posted my expectation of a measured move. And it failed. Twice the futures tried to set up a pullback, twice that attempt failed and markets finished red. After exceptional, and never seen before, 3% drop in a row, a 1% selloff now seems like a lukewarm tea for babies. Almost nothing to talk about. Just a few days ago, 1% drop would spark heated debates on social media about crashing markets. Today, nobody cares.
And the markets are setting for another exceptional rare behavior. We had the market falling for five consecutive days. And today’s overnight futures are already down by 1.4%. So, if cash market (SPX) stays down tomorrow, we will have a 6th consecutive down day with no bounce.
The market have seen five consecutive declines without a bounce only twice in its history – in December 2014 and January 2019.
However, the absolute record was 10 consecutive down days which occurred in February 1966. If tomorrow stays red, we will break the 5 day record heading towards 10 days rank.
However, we have approached a 200 day MA and if we stay red tomorrow, we may actually touch it on daily time frame. We may go a bit below it. But, it will be crucial moment. Will the buyers step in and start buying? And if so, will it be a sustainable buying or just a dead cat bounce? We will have to wait and see. So far, in the recent past (at least 2 past years) corrections were always supported by 200 day MA and markets recovered. Let’s see, if this will be the case these days or not.
There are two observations I noticed and find actually funny, if you think about it.
First, the coronavirus issue. Everybody talks about it. Everybody project worse case scenarios, deaths, gloom and doom, cases here and there. But, it seems to me, the coronavirus is not that of an issue (and I do not want to downplay its impact on people). It seems, it is the media, and so called experts on TV shows painting the apocalyptic after-virus world with few human survivals, what makes the matter worse, that it actually is.
At least, we have the memes to laugh at. For example, Trump and Pence going to address the coronavirus and coordinate its handling. Now, we are in big trouble.
The second observation I find funny, is in the same psychological category as the one above. When the markets are running up, everybody is freaking out about it, selling their positions, screaming about high valuation, predicting the end of the world, rigged markets, FED pumping the stocks, fake economy, and who knows what else.
And the markets start finally falling and correcting, these same people are freaking out about it, selling their positions, screaming about crash of the markets (8.3% pullback is not a crash), predicting the end of the world, rigged markets, FED screwing up the markets, fake economy, and who knows what else.
I find it truly funny. All people who claim that they are long time buy and hold investors are buy and hold until the next pullback.
Stay safe out there, save cash for more buying. When this rout ends, it will be a great opportunity to be buying at a huge discount.