The market is under heavy selling pressure as a dovish Fed is no longer providing the support it did before its meeting this past Wednesday. Previously the China trade issues were not a lasting problem for the market because the Fed was there to cushion the blow with lower rates.
That dynamic has shifted. The market no longer is feeling secure about the Fed and it is becoming increasingly clear that the China trade issue will not be resolved quickly and that is it going to produce some economic fallout.
The bears have been marking this argument for a while but the big change now is that the price action is finally confirming the negative thesis.
The only logical move at this point is to play stronger defensive. Tighten stops, build cash and don't let losses build. Maybe the market might reverse back up very quickly but that isn't relevant. What is relevant is protecting capital in case it doesn't reverse back up quickly.
I don't try to predict how long corrective action like this can last. I simply respect it and do what I can to protect capital. This selling actually makes me optimistic about the opportunities that will develop. When the market is sold like this it tends to do so in a very correlated way and that means all stocks - good and bad - are sold. Eventually, the market will sort out the winners from the losers but the process can take time.
I'm holding about 70% cash at this point and am more likely to be a seller than a buyer today.