The indices held up fairly well on Tuesday but worries about the growing number of Covid-19 cases and rumors that France is about to reinstitute stay-at-home orders is scaring the market. Typically there would be some dip buyers looking to take advantage of the weakness but with the great uncertainty created by the election, the unlikelihood of a fiscal stimulus deal any time soon, and worries that Covid may hurt the economic recovery again, there is no compelling reason to do any bottom fish.
There are quite a few stocks on my screens that I'd like to buy with the market in freefall and no short-term positive catalyst in sight, there is no reason to jump in and do much.
What is most interesting about this action is that it is mostly index driven. Stocks are not being sold because fundamentals have collapsed. They are being sold because the indices are being sold and when that happens everything in the indices suffers regardless of merit.
The good news is that this sort of selling eventually leads to opportunities. The 'good stocks' will come roaring back and leave the 'bad' stocks behind.
The problem is timing. We just don't know how long this election and Covid uncertainty will persist or how far things will fall while we wait. Fundamental conditions suggest that there will be a surge when a fiscal stimulus deal is done and a vaccine becomes widely available, but when will the market start to anticipate those things?
Stay cautious and protect capital but be very aware that opportunities are developing.