More Volatility

Downside moves are always more volatile. Volatile behaviors is even more pronounced during turns. Clustered wide range days are very common during market turns. So we have yet another volatile day with 750 stocks down 4% plus. In addition there was a hint of panic in the market.

Panic and fear is very good for markets. Panicky markets can turn on a dime. Some years back I had documented , every single 10% plus correction in market for last 30 to 40 years. I still have those notes in my files somewhere in USA. If you study all the panicky disruptive moves in market during various crisis you will see such moves resolve to upside with great force. Most panicky moves are followed by ferocious rallies, those rallies retest their bottom but after many weeks or months. Protracted downturns are less volatile and have systematic distribution with slow methodical selling.

From a more trading dynamics term, in my opinion and observation , in times of panic stocks go down due to absence of bids. The absence of bids forces sellers to aggressively bring down offers. You will realize this if you try and close a long position in panicky market. Once the panic subsides normal bid-ask behavior returns and hence the ferocious rallies.

As I have said before any market turn will be a process. If you want to play safe, best option is to wait for 65 days ratio to turn. When that ratio is in green all breakout based strategies have very high probability of success. In spite of the down move today, the 1000 plus breakout day still holds and it is time to anticipate turn to upside rather than chase the move to downside. For all the emotions around this move, this is just a 10% correction so far after multi year up move. Ignore the news look at the Market Monitor numbers.


Worst thing you can do during market correction is to listen to perma bears . All bearish scenarios and bearish propaganda sounds very logical and intelligent during market corrections. But the biggest strategic error a speculator can make is to get caught in bearish web. If you do that you will miss on next big rally. You should be tactically bearish, strategically bullish.

100 years plus of history of market clearly demonstrates triumph of optimism over pessimism. In few months time all this Armageddon talk will be just a blip. Perma bears are fools and idiots who do not understand markets and the markets statistical tendencies or want to ignore it to create a cult. Fools and idiots seldom make money in the market.

Current market is ideal for day traders and nimble swing traders. Alternatively one can use such period for R&D. The best thing to do during such time is to take a vacation, sit in cash and enjoy the fun and games from sidelines. Timing your vacation during market corrections is always good strategy.