The market has been in freefall since the hotter-than-expected August Consumer Price Index report on Sept. 13. Interest rates have been steadily rising, the Fed remains unwaveringly hawkish and worries about a slowing economy have been growing.
In addition to these factors, the UK has experienced unprecedented economic chaos as the new prime minister attempts to address inflation and slow economic growth. On Wednesday morning, UK bonds were crashing before an announcement that the Bank of England immediately would start buying long-dated UK government bonds in order to stabilize the market.
US futures have recovered a big chunk of losses overnight, but there is also news that Apple (AAPL) has canceled a production increase for its new iPhone due to slowing demand. Apple has exhibited strong relative strength recently and has been a safe haven in this chaotic market, but it is indicated down about 3.5% in the premarket here on Wednesday.
For a couple weeks now, traders anxiously have been trying to catch an oversold bounce or a counter-trend move. The thinking is that stocks are very oversold and the mood extremely negative, which would lead to a relief bounce.
The pattern of the action has been early strength that is quickly sold and a poor close. Strong starts and weak closes are classic symptoms of a bear market, and there is no question that we are buried in one right now.
The negative news from the UK and Apple finally may help to create conditions for a better bounce. Technical support in the indexes has failed and the news is about as ugly as possible. Too many bulls have hoped that the worst already has been discounted by this market, but now there is a better chance of that being the case as we are hit with the ugly headlines this morning.
If you are a longer-term investor, none of this is very important right now. The market is under severe pressure, and even if there is a relief bounce there is no reason to rush in and put precious capital to work. It is going to take a while for market conditions to improve, and once they do, there will be plenty of time to build positions in your favorite names. There is absolutely no reason to buy into the teeth of a decline. You are not going to miss out if you don't buy today.
If you are a trader, the increased volatility and news flow are likely to create opportunities for fast trades. Just be clear about time frames and manage trades carefully. We are experiencing highly unusual events, and we are going to have big moves in both directions as they unfold.