It goes without saying that as of writing, the markets are extremely volatile. The long-term picture is one of moving upwards for years with just a couple of significant pullbacks. Now we can see the supply chain being hit by hard Coronavirus fears and the markets have sold off hard.
But, not that hard!
We've really just taken back the gains since October 2019 in a 10 year bull run. 4 months of gains. If you consider that we moved up from 666 to 3400 on the S&P 500 Futures with only 1 major correction in 10 years, then going back to October 2019 prices doesn't sound that bad.
What I've found really interesting during this move down is the amount of pundits calling for the bottom of the move. In fact, since the 3rd day of the sell-off, there's been articles from trading educators and mainstream news sites on the various data points from previous "Big Moves Down" that they then used to predict the end of this one.
Some were using percentages "the last time the market moved down x% was at these times, then it did y" or number of consecutive down days "last time we had z number of down days, the market had a big move up".
Interesting - but guess what? On those previous occasions, we weren't facing a global pandemic that (regardless of the actual health implications) was doing a pretty good job of closing down the global supply chain. So why would those statistics be relevant to what's going on right now? It's uncharted territory.
The problem with this train of thought is that it reinforces the idea that the best thing to do when the market is moving down is to look for buying opportunities. You'll likely see a lot of buying today too - by people thinking they have missed out on low prices.
But what could the next few months look like? What if Coronavirus reaches every State in the US and every part of every country on the planet? It's not unlikely. What if in a few months, we are just toughing it out? Have we really just seen the best prices available considering that scenario?
I sincerely hope that those buying yesterday were right. For me though, I just don't feel that we just witnessed bargain prices yet. This 10 year grind up has really been about too much money sloshing around and not being able to find a home.
Get into your head that the market has hit the bottom, then you start to feel like you missed out when it moves up. That's a great recipe for entering in a really poor spot and having the volatility take you out over & over again. For most traders, this simply isn't the sort of volatility they fare well in. Taking a few days off while it calms down is much better than explaining to your partner why you need to top up your trading account again.
So for those of you going into today with only 1 side on your mind, especially day traders. Pick your spot, play what's in front of your face, don't suddenly try to play "market predictor" just because the News and the Pundits have put you in that frame of mind. You probably weren't playing "guess where the day ends" 2 weeks ago and you don't need to do it today either.