The S&P 500 gapped down to start the day and took out key support levels. The danger of further downside has grown significantly as a clear downtrend is now developing.
There is always the chance of a reversal, but in recent years this has typically been driven by central banker news -- and none seems to be immediately forthcoming. Earnings may help to provide some support, but that won't occur until next week at the earliest.
Breadth is extremely poor, with more than five losers for each gainer and no meaningful pockets of positive action. The selling is across the board and, so far, dip buyers are missing in action.
There are many ways to approach the market, but when there is a technical breakdown, the best thing you can typically do is just to get out of the way and try to prevent further losses. Many market players focus on catching bounces, which can be very lucrative, but before you worry about that, it is best to make sure you focus on protecting capital first. If you control your risk, then the returns will come.
There is a slight bounce as I write, but I have no interest in buying right now. My cash position in managed accounts is around 85%, at present. I am holding a few odds and ends, such Etsy (ETSY) and Aratana Therapeutics (PETX) , which I want to add to -- but today is not likely to be the time to do so.
My concern in market action like this isn't predicting the exact low. My focus is to buy stocks when they are going back up and have the best chance of a sustained rally.