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What Happened In Those Wild 11 Minutes Thursday?

Around The World In 11 Minutes!

Why are we saying 11 minutes? See the waterfall from about 2290 on this index? It took 11 minutes to go from there all the way around the world and back again in 11 minutes.

Given today’s action in the markets we thought we’d take a few moments to give you our version of an update given the extraordinary events of the day.

As we’re sure a lot of you already know by now that a big piece of today’s sell off was an erroneous trade.

Ok we get that however, the market was already down quite a lot before this around the world in 11 minutes took place.

Over the last few days we’ve been talking about the overbought nature of the markets.

We’ve talked about the negative divergence out there.
We’ve talked about how extended the leaders were.
We’ve talked about trendline breaks to the downside.
We’ve talked about support levels that were broken.
We’ve talked about coming down to the 50 day average.

All of this we’ve talked about in advance of today’s action.

We’ve stressed not to chase stocks and now you know why.

We’ve talked about never biting off more than you can chew with regards to position size trade management. And now you know why.

So you see regardless of what has been happening out there we are more interested in managing risk than we are in touting hot stocks and 100-500% returns like a lot of other websites and newsletters.

On numerous occasions we’ve talked about having some short exposure as a hedge via Inverse ETFs and YES, we know a lot of you out there do from the emails we’ve received over the past month or so. Nice Job folks! You know who you are.

So what does this all hold for tomorrow? We do have one concern and that is what this does to the psyche of the average investor for tomorrow’s open. It’s the chicken little, “the sky is falling” scenario.

Our other concerns going forward over the next 48 hours is that of the overseas markets action tonight. May not be pretty.

“This is the Information age” and things happen real fast, so expect another wild day tomorrow.

A retest of the lows of just before the “Around the World in 11 minutes would not surprise us nor would the S&P 500 gapping up 10-15 points either. If the S&P 500 were to gap up like that? Would we be buyers? Absolutely not as it will probably get sold into.

We’ve said the last few days we wanted to see some stabilization and that is still the case. What we want to do though is use the volatility to our advantage. Should we have a spill over from the overseas markets in the morning due to a gap down trap door?

Well? We’d consider buying in the face of some of that fear. One doesn’t have to go full tilt but we’ll nibble and pick some off here and there into that tomorrow. As far as we are concerned the uglier the open tomorrow the better.

What about my current portfolio ? What about my 401K ?

Well what’s done is done. Actually in a weird sort of way it’s good that this is taking place really fast as it gets it out of the way. We just lost a lot of points and we are going into a weekend not to mention we have the overseas markets to contend with. Our indexes have really lost a lot here already so odds favor baring some unforeseen European event we are a heck of a lot closer to being due for a bounce than we were two days ago. While not pretty it is what it is and you might as well just let it go through its gyrations. It’s where we were back in October, 2008 and patience was certainly a virtue then.

You can look at the market a few ways right here.

1. You can get emotional and hit the sell button AFTER we’ve already dropped, and dropped a lot, so that doesn’t make a lot of sense.

2. You can choose to gut it out and deal with the emotional volitility till we get a bounce then you can consider gettting out of some. Sometimes the attitude of “Whatever” is a just what the doctor ordered.

3. You can use it to do some selected buying as after all our motto is “We Do Not Chase Stocks, We let Them come to us” That means buying in the face of fear, the hard part is how much fear? Down 200? Down 300? Heck had you been able to get an order in on AAPL when it was 216.00 within 5 seconds it went to 226.00 We kid you not.

Of course all this does not take into effect of unforseen news driven events but you have no control over those anyway. That’s where risk management in terms of the size of your positions comes into play.

When in doubt stay out

That cliche isn’t always a bad thing you know. Should the markets implode? Well if you have short positions peeling a little away on strength may not be a bad thing. As for shorting? Understand you are in a high risk environment. We mean after all we’ve been falling sharply for going on 4 days now.

All in all the good news is we’re probably 90% done with the recent what’s became a severe downswing. The bad news is? The last 10% can be the worst emotionally. But we’ve been through it before.

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Disclosure: No positions