I suppose many were expecting more in terms of price and time. But if you were paying attention (as I was, because my stomach was churning) then you witnessed about a 4% drop in the indices in the matter of five or so days, and if you count the SPX futures it was about 5% (to the lows reached overnight on Aug 7/8). And now, about a week later much of that lost ground has been recovered, to the dismay of many just waiting.
I could only hear the naysayers clamoring for more downside. this was TEOTWAWKI, right (The End Of The World As We Know It)? It had to be ‘the big one,’ because we’re overdue (that was the excuse heard ’round the world last week).
The speed of this market is not only frustrating but it is paralyzing. Imagine trying to enter a freeway from a dead stop when the flow of traffic is going about 100 mph and it’s crowded. Not an easy task, but once in the frustration sorta ends and the stress really starts! Not unlike these crazy moves in markets.
We can talk for hours on end about this correction or that correction, what the market needs, what is healthy and where we should time our entry. We often listen to others telling us what the market is supposed to do! Imagine that. Yet, all of that is great water cooler conversation but is NOT fodder for action.
The Market Will Always Tell Us What To Do
What did the market tell us? Simply put the same message it’s given for the past couple of years. I’m a believer in following trends and patterns. On so many occasions the spikes higher in VIX were incredible buying opportunities. This latest one was a bit tougher due to elongated stretch of VIX extension, but it has played out – much like the last or eight so similar signals (see chart).
So, while you may want to buy into ‘the next drop is doomsday’ theory, those listening to the markets will pass you by. I suppose someday the dip buyers won’t be able to pick up the pieces from a correction, but for now that is not the case. Of course, the market will tell us when that happens!
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