How Bad Is It? Here's How Bad It Is

在波動市, 保本為上 !

realmoney.thestreet.com

Market players have been struggling with some of the worst action in years during the first two weeks of 2016. I can offer a big pile of numbers that illustrate how bad it has been, but it can be summed up with two very simple statements.

First, we had over 1,850 stocks hitting new 12-month lows today. That is roughly a quarter of the entire market. Second, nearly 82% of stocks in the market are trading below their 200-day simple moving averages, which tells us how broad and deep this selloff already is.

Technically, the major indices are still not in a "bear market," which is defined as a drop of 20% or more from recent highs, but that is meaningless. The great bulk of stocks not only are in a bear market but have been in one for quite a while.

When we have action this bad, the question on everyone's mind is, "When will it end?" There is always a crowd of folks anxious to tell us everything is fine and we should just hold on to our stocks and wait for it to blow over. Others will tell us this is the start of a long, ugly downtrend and we better be prepared because it has a long way to go.

I have no idea who is right, but I do know the most important thing to me is to keep my accounts as close to highs as possible, and in order to do that I have to be defensive and be ready just in case things continue to deteriorate. I'm far more concerned about protecting capital than I am about trying to catch a quick turn. I know I'll have plenty of time to rack up some gains in a better market, so I'm not going to spend too much time or effort fighting with one that is in a downtrend.

You can bet that when we return on Tuesday there will be intense focus again on trying to catch an oversold bounce. Traders did catch one on Thursday, but it was not an easy task and many were slammed back down when they held overnight.

This is definitely a market that has undergone a significant change in character.

We need to accept that fact and then we can start looking for ways to produce some gains. Capital preservation comes first and that means being cautious in a downtrend.

Have a great weekend. I'll see you on Tuesday.

Rev Shark