The Dow drops almost 300 points!
Bonds were down!
Gold was down!
Everything was down!
It’s a bloodbath!
The market was down today if you hadn’t noticed.
Specifically, as measured by the S&P 500 Index, the market closed down -1.44%. I’m not going to discuss today’s job report or any of my thoughts on the economic implications even as much fun it would be. But I will say that it’s funny how everyone expected the market would have been up considering the ostensible good headline numbers. That’s a different story though.
Lately it seems people’s fears reach their height just as the market makes new highs.
The FED will raise rates!
Global growth slowdown (i.e., the dreaded D-word – deflation!)
NASDAQ breaks above 5,000! Post-crisis bubble!
The above worries and more seem evermore vocal, at least to me that is. Don’t take my dismissive as arrogance or even as being naive. Price dictates my strategy not news headlines.
I know you probably hear this all the time but it bears repeating again: Know who you are as a market participant. What’s your time frame? What does your strategy currently dictate (do you have a strategy is a more important question)?
If you’re a long-term investor I don’t think I’d categorize today’s down move in the broader market as worrisome. Of course, I know nothing about your individual strategy and its many nuances. But in the context of the bigger picture, things look pretty normal to me (see chart below).
|S&P 500 Index – Weekly|
Now if you don’t consider yourself a long-term investor (someone I refer to that has a multi-month/multi-year time frame), then what is the price action telling so right now? Well, all major indices ($SPY, $QQQ, $DIA, $IWM) are all above their 50smas. The major indices are still all positive YTD, albeit some only marginally.
|Sector Performance – YTD|
|Index Performance – YTD|
So what, you may be saying.
All I can tell you is do what works for you. I know for me, I had on some small trailing positions from last week (post) but got stopped out of all of them either late last week or early this week. So yes, I am flat, but I’m still looking and stalking the next opportunity (how dramatic).
From a swing perspective, I’m just looking for names holding up relatively well to the market, especially so if the market decides to pull in a bit more. I’m looking at names like $EBAY which I mentioned earlier today due to its massive relative strength and new ATH (this was also mentioned in my $TWENTY15 predictions). Or $JWN, $ETFC, $FL, $DVA, $FNSR, or $TWC: link
So the moral of the story is down days happen. They have always happened and they will continue to always happen. In fact, I did a quick backtest in excel just to see how often down days occur. It turns out about 45% of the time since 2009. So yeah, you should expect them. (down days in excess of -1% occured about 13% of the time since 2009)
Remember: Know who you are. Know your time frame. And know that down days happen.
Please let me know if you have any questions or comments.