Big market swings to produce dramatic market predictions. Everyone wants to be the person that accurately predicts what is going to happen next. Buy the Dip! Sell the Strength! Load up the FANG names! Short the Qs!
There is no shortage of folks that are willing to tell you what to do next but more often than not, the best course of action only becomes clear as conditions shift, emotions cool and the price action becomes more certain.
I often say that I don't know what I'm going to do until I do it. I may have a general plan in mind but when I act and how I implement my plans will be a function of what is happening at this moment. The big dramatic prediction may have sounded good but it is the execution at the right time in the right conditions that makes money.
Many market players have a strong impulsive reaction to poor market action and immediately want to buy something. Big negative opens -- like we saw today -- create the feeling that we should immediately take action and typically that action is to buy into the weakness rather than to sell into it because we are well conditioned to do just that. Everyone knows that we are supposed to 'buy low and sell high' so isn't this exactly the sort of situation that we should be buying?
Perhaps, but building positions should be something that is done over time especially in a market that is in a downtrend and likely will remain volatile for a while. You don't have to make predictions of any sort in order to buy carefully and with controlled risk. You simply need to go to work and take some action.
Big predictions attract attention but systematic implementation of strategy makes money.
The indices are now off their early lows and that is causing some sighs of relieve but the introduction of the 'oil war' dynamic today is going to make it tougher for the market to bottom. For the last two weeks the market was trying to price in the economic impact of coronavirus and had a hard time due to uncertainty. The market is now trying to price in the likelihood of a full-blown recession and it is even more difficult.
We know that it is very likely that the Fed is going to cut interest rates again but the market is already lower than where it was when they cut a half point just a short time ago. Will a second cut put in a bottom this time?
We shall see soon enough but the risk to the downside remains extremely high when even highly dovish Fed action can't put a strong bid under the action.
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