Global concerns over the Chinese markets spilled over across the globe. The Dow was down nearly 500 points today and the NASDAQ off more than 140 points. Volume jumped across the board as sellers continue to punish the market. Volatility continued its move higher today as the VIX was up 10%. The fear index is above 30 showing there is quite a bit of fear amongst market participants. The continued weakness in this market is completely obvious. At this point it is best to stand aside and wait for clearer skies before entering the long side of the market. These types of markets can get to extremes rather quickly and will run most into the ground. Our position is clear with cash remaining as king and the long side of the market is on hold for the foreseeable future.
We are seeing plenty of traders trying to bottom tick this market. Buying the dip is a mentality and you can see it with individuals piling into US equities last week. Unfortunately, most are likely underwater and who knows if they will panic and get out. If you are trying to catch falling knives make sure you have a stop loss strategy. In a runaway market losses can compound quite quickly. If you are not nimble enough you will find yourself in a world of hurt. The best course of action is wait for a high probable trade setup rather than churning your account trying to pick a bottom.
There is one stock bucking the trend EFOI. It has been able to fight off the market weakness and push higher. On the flip side you have stocks like GOOGL and NFLX closing below their 50 day moving averages. AMZN is not too far behind. Never a good sign when you see market leadership deteriorate. There are intraday moves like FORD to take advantage of and if you are able to watch intraday than it is worth your while. However, for many this is not an option. It is best to let the market sort itself out and while this goes on our next crop of leadership will emerge.
Do not be a hero in this market. It will not do you any good. Keep your powder dry and when we do have the opportunity on the long side we have the firepower to take advantage of it. Now we await the ECB on Thursday and the jobs report on Friday. Until then stay patient and let this market sort itself out.
