Before everyone starts freaking out, this is a NATURAL process of the market cycle. We go up for several years, digest for a while, then go down for a bit, then digest again, then go up again. It's called a trend.
The logical place for SPY to go after retesting the recent breakdown spot would probably be $180ish (October 2014 lows). A strong selloff would put SPY probably around $165.The former would be a healthy correction, the latter a bit concerning but still relatively normal. So no I do not advocate "BTFD" here since we now have all four major indices (DIA, QQQ, IWM, SPY) below their 200 day moving averages as well as a number of potentially bearish news items on the horizon. This is a bit different than a dip down to the trendline like we saw for most of 2013 and 2014. I also am not saying panic/run away/sell all the things etc.
The correct thing to do here is wait. Next week we likely have some digestion since we dropped 5-6% this week, so we should see some rebound, but until the major indices reclaim and HOLD their 200 day moving averages I am not convinced the digestion/bearishness is over. I mean, it's not even really bearish right now. We've been going up for 6.5 years. It's time for a little rest. Don't freak out. Protect yourself with some put options or maybe lighten up on stuff that has had a nice run, and prepare to buy more after we see whether the market will continue down toward $180 or bounce hard like we did in October. I am all cash in my trading accounts, but still 100% invested in my long term accounts with no plans to change that. If there is a nasty selloff to $165 I will load the boat in the long term accounts with strong companies that have sold off due to emotion. If we bounce from here I will just hold what I have. My trading accounts I'll continue to trade like always. I'm shorting more during the day or playing inverse ETFs long on weak days so there is still plenty of opportunity to capitalize.
Anyway just my .02. Random ramblings. Take it or leave it
Submitted August 21, 2015 at 10:27PM by ghostofgbt http://ift.tt/1E95e3B
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