Press the Restart Button on the Video Game

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Whenever the Dow Jones Industrial Average plummets more than 400 points in a single session, it obviously trumps just about all attractive individual chart setups that had been forming recently. In essence, it is similar to when you were a kid, playing Super Mario Brothers and running out of lives in the upper levels. Despite the progress you made in conquering the various worlds, you still pressed the restart button to do it all over if you did not beat the entire game.

Similarly, when this highly volatile, news-driven market gaps down and trends lower throughout the day, it forces me to press the restart button on the various charts that I had been monitoring. That does not necessarily mean that the bears are back in charge on an intermediate-term perspective, as we are still above 1220 on the S&P 500 (the prior resistance from the past few months). However, as I write this I see that we continue to trend lower and 1220 may be in the bears’ sights after all.

Any way you slice it, today’s action is ugly and too monstrous of a sell-off for me to ignore. Accordingly, despite some charts still holding up well, I am going to reduce risk until further notice.