The smell of fear is wafting in the air this morning as the selling pressure is intensifying and key technical levels are breached. Breadth is two to one negative and new 12-month lows are piling up, but what is most notable is that there is no bounce. Bids have disappeared and they are selling into the abyss. The most obvious sign of fear is when there is little sensitivity to price.
There are two key things to keep in mind right now. First the indices and the majority of stocks have suffered some severe technical damage and there is no way to know how much further they may fall before they find support and start the repair process.
The second key thing is that this action is going to create some great opportunities. When selling like this takes hold all stocks are punished. There is no attempt to sort out those that are still good values from those that aren't. For the patient and strategic trader this means that there will be potential for some great opportunities when the emotional selling comes to any end.
As I've been saying for days now the most important thing you can do right now is protect capital rather than worry about finding entries. Have a shopping list ready and stalk the names you like. Don't be in a rush to buy.
One stock that shouldn't be on anyone's shopping list is Sears Holding (SHLD) . It was already a penny stock and now it is even a cheaper one after news that it is ready to file for bankruptcy. That isn't any huge surprise and actually is a relief to many who have watched the agonizing destruction of what was once an American Icon much like Amazon (AMZN) is today.
Sears is fascinating much like a car wreck. It is hard not to look but it definitely is not an investment vehicle. It is a curiosity and may bring back fond memories for some older readers but don't even think of it in terms of investment. There are always some traders looking to play the volatility on bankruptcy filings but that is not a game I'm interested in.
Work on those shopping lists. This action is terrible but it sure is creating some interesting opportunities.