The market wasted no time producing downside follow-through to yesterday's poor action -- not even a bounce attempt so far, which is a change in market character. Up until today, any weakness has been immediately recovered. It is still early and we'll see if the bulls can regroup, but this action is triggering stops and emboldening the bears. The likelihood that a bounce will be sold is growing.
When the market turns like this it can be quite surprising how fast you can give back hard-won gains. Over the years, I've found that the pattern in my accounts is for gains to accumulate slowly, and then I'll suffer a quick spike down in which I give back a chunk. The key is to make sure I move quickly to stop the bleeding, which is why it is so important to honor stops.
Too many people hesitate to use stops because they don't want to give up on a favorite stock. The flaw in that thinking is that nothing prevents you from rebuying a stock you just sold. I think of a stop as an insurance policy; if I end up rebuying a stock at a higher price, that is simply the cost of the insurance premium.
I'm in defensive mode and doing my best to keep losses contained. There is decent action in big-caps such as Netflix (NFLX) and LinkedIn (LNKD). Sarepta Therapeutics (SRPT), a recent Stock of the Week, looks perky as well.