This market continues to move lower while investors continue to be complacent. The VIX remains at a lower level then we saw in August of last year. We simply do not have any fear this market may continue to fall lower. Banks continue to suffer heavy losses while utilities continue to win by not losing. It certainly appeared the Plunge Protection Team (PPT) came in to save the day. Just after 230pmEST something kicked off a buying spree and did not let up until 345pmEST. The Dow was able to halve its losses and the NASDAQ was able to close just below the day’s opening price. We wouldn’t be surprised to see some follow through after today’s buying, but the lows are not likely in just yet. Cash remains king.
The biggest question today will be whether or not the last hour and a half was short covering or buyers coming in accumulating shares. We have certainly been witness to this type of action throughout this slide since the end of last year. An issue we have with this market is we have not seen any capitulation. On August 24th, 2015 we had capitulation as well as massive mispricing in many ETFs. We may very well rally, but at this point any rally will likely be met with the same type of selling until we see this market capitulate.
Cash remains king in this type of market environment. We do have opportunities intraday. One such opportunity was ZAGG. Day trading is not for everyone, but if you can keep losses small and ride winners you can make a difference in your portfolio. While this market sorts itself out from an end-of-day trading perspective our chat room will continue to help pad our gains.
If this rally is to have a chance of succeeding, we need to find leadership outside of the FANGs. FB and GOOGL are in V-shaped moves and are very risky. Sure, they can produce some gains. However, from a longer-term holding period they will more than likely lead to losses and we are not big fans of losing. While we take our losses we make sure they are small. No need to pile up big losses and kill our accounts.
It would be nice to get a sustainable rally, but we are not going to be a hero and risk our hard earned capital on a guess. Stay patient and we will strike when the time is right.
