With every pundit hitting the wires on his/her belief on why the market sold off, I began a list. Remarks in italics mine:
- Second consecutive month for China's PMI below 50; considered recession territory by most (we've been programmed to believe they'll always save us.)
- China's bonds reflect an increase in rates.
- Bernanke didn't increase QE. (we want more!)
- Rates are going up (panic, run for the exits)
- We're beginning to "bake in" the Fed easing off the gas pedal (taper)
- Lack of confidence in the true strength of the US economy w/o QE
- Quadruple witching (Opex)
- Dollar strength will kill US export demand
- Japan's Abe needs to ease more (seriously?!)
- Next week is end of quarter (do you really want to show you went long AAPL this quarter?)
- 16x p/e is close enough for now
- Typical mean reversion
- 6-8% above a prior all-time high is typical to see massive profit taking
- Summer solstice (yeah, I know)
- Some UK banks are not meeting reserve requirements (fear of banking collapse)
- Unrest overseas will spread
- Austerity isn't working
- Record margin debt is unsustainable
- Sell when everyone's elated
- It's the end of the cycle
- Elliott Wave count said we were done
- DeMark count indicated "sell"
- Stops were hit and a waterfall effect took control as it triggered more stops
- Meant to sell in May and go away but I was greedy and waited
- It's all smoke and mirrors; we're going to crash! (yeah, I know)
- I'm too buys playing Candy Crush
- My dog ate my homework
What kills me is that it doesn't matter who is right and who is wrong. Traders are so focused on trying to determine "why" they forget the 800 pound gorilla in the room.
- There are sooo many investment funds out there - ALL making sell decisions based on a variety of facts and NOT all for the same reasons!
Who knows? It's a Helicopter! Sure we all talk about it (the why) but I learned long ago (thank you Dad) not to put too much energy into "why" and to trust the charts. When you see breadth breaking down and major profit taking w/volume on risk assets such as THD, JNK, HYG, etc. it's a sign: warning Will Robinson! The "whys" don't matter as much as trusting what the charts are telling you, move up your stops.......and protect your capital. Another buy opportunity will present itself. It always does. Last time I looked, people didn't suddenly stop putting money into their 401K's. Be patient, get out, enjoy the Summer sunshine and check back in next week. The pundits will try to convince you over to their way of thinking (be on my team!) but it doesn't really matter. Charts don't lie; people do.
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