"Never, never, never believe any war will be smooth and easy, or that anyone who embarks on the strange voyage can measure the tides and hurricanes he will encounter. The statesman who yields to war fever must realize that once the signal is given, he is no longer the master of policy but the slave of the unforeseeable and uncontrollable events" – Sir Winston Churchill
I am convinced Churchill was a stock market aficionado because that quote seems to work just as well for the stock market these days! Well actually it was the next quote that fully convinced me!
"One ought never to turn one’s back on a threatened danger and try to run away from it. If you do that, you will double the danger. But if you meet it promptly and without flinching, you will reduce the danger by half" – Sir Winston Churchill
What a day! I decided to start with the Dow Jones Industrial Average. Why? Because it’s the only chart listed that showed green! One hour into the trading day, the bear raids began: APPL, GOOG, BIDU, NYX, X, FCX all sharply lower. Capitulation surely? The stocks rebounded wonderfully off their lows, hammers surely! And then…the war began again. The major averages finished relatively flat for the day, but Google was down $7.75 (it had been $12 lower), Apple closed down $2.41 (it had been $7 lower), Baidu was down $16 (it had been an additional $9 lower), NYSE Euronext was down $2.95 (near the lows of the day and weeeeeellll outside its Bollinger Band), Freeport McMoran closed down $4.25 (it had been $2 lower), and US Steel Group was down $4.70 (it had been almost $5 lower).
In short, it could have been worse. but not by much. That close was anemic at best. Although the markets are oversold, markets can remain oversold longer than you might expect is rational and today was a prime example. However, we believe a snapback should occur within the next couple of days. That does not mean the resumption of a bullish trend. Rarely does a single trading day signify a trend change. The greater the volatility, the greater accounts fluctuate UNLESS you are hedged. Are you hedged? More than your trading capital, you have emotional capital tied up in this game too. Don’t deplete it by worrying about your account fluctuating wildly on a day-day basis.
The S&P 500 touched its previous low that occurred in late November, near the 1,400 level. In fact, the August closing low was near today’s price level also. Triple bottom? Some technicians say there is no such thing. Never say never! We are approaching a critical time of the year, one of the four earnings seasons with Alcoa (AA), officially kicking off the season this week. This might be the fundamental driver needed to turn the technical trend around. We stick by our thesis that this year is frequently going to be exceptionally volatile and only those that stick rigidly to a proven system will be rewarded. So, reward yourself and stay disciplined. And if you’re thinking about doing something you shouldn’t, just RELAX, DON’T DO IT!
Have a Terrific Tuesday!
