Market players have generally been aware of the potential for some end-of-the-year selling, but many were caught by surprise today due to all the talk about reaching the 20,000 point in the Dow Jones Industrial Average. Many traders, including me, were looking for the 20,000 level to fall before any real selling set in.
The 20,000 level was an ideal "sell the news" setup, but, as is so often the case, it may have been too obvious. Rather than wait for the obvious trigger, the selling started after a small gap-up open, when momentum failed to build. All those folks that were waiting to sell into the 20,000 euphoria had to scramble to sell into the reversal. That means there was no quick support because the typical dip buyer was still stuck holding long and waiting for 20,000.
My biggest concern at this point is that we may not see much of a bounce back before we close shop on Friday afternoon. As I've mentioned, the last two days of both 2014 and 2015 were trend-down days with losses of about 1.5%. The S&P 500 is now down about half that amount, but in this case we ran up to a much greater degree over the last six weeks or so. Dip buyers don't have the same motivation this week as they normally do.
I've taken a few stops and really don't see anything I'm interested in trying to buy right now. We are dealing with end-of-year factors that are quite different than what we'd see in a more-typical market.
We will see how we close, but I'm not expecting much of a recovery today. I'd like to do some buying, but it will have to wait until this sloppy action abates.