The DOW fell over 725 points yesterday in a nasty stock market dump. Today as I write this it is poised to gap up 200 on the open.
Here are my key takeaway’s from the drop.
1)The drop wasn’t shocking, because, as I wrote Monday, stock market internals are deteriorating and that is a classic sign of a market headed for a correction. I actually paired back on my long positions last week and raised some cash and did more selling in my neglected Robinhood Account Monday to get more defensive. Corrections typically cause 10-20% declines off a high in a market and happen at least once a year.
2)Bonds rallied hard yesterday, a sign of a “risk-off” mentality as people threw money at them, with no care that they yield less than the rate of inflation. At the same time, gold barely dropped at all, so it is showing huge relative strength against the US stock market averages. It was down about 1/10th of a percent.
3)Check out the VIX.
The stock market fell hard enough to cause some rapid put buying in the options market, enough to cause the VIX to jump over 30% in one day. Such big daily moves in the VIX typically do bring immediate-short term bottoms in the market, so don’t be shocked if we don’t see the market rally today, and perhaps do well into next week, when several key earnings reports come out, which give something for bull traders to buy into.
4)Bitcoin is trading below $30,000 this morning. It’s a disaster in the making, well its been bad for people since it peaked at $60,000 and trapped so many on the way up.
I did this video yesterday going into the close; tougher than I thought to trade and talk at the same time.
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-Mike
