90% Down Day Spells Capitulation

Did you know that there are only 166 stocks, with market caps above $1 billion, that are within 5% of their 52 week highs? The Dow is now off 1,000 from its peak and Chairwoman Yellen is set to preside over the dumbest stock market rout since the great nano-tech bubble of 2004.

I’m taking claw hammers to the skull and brain today, like many of you. But I do have some cash and a mind for this sort of thing. Truth be told, you and I, the unwashed reader, have gone through many tapes like this and have always came out on top, haven’t we? I don’t see any reason to believe this time will be different. It’s important to remain cool, try not to sell at the bottom, and buy more when the selling programs have exhausted themselves.

Just to play devil’s advocate here for a moment: there is a very large equity exposure in the accounts of the investing public, from pension funds to hedge funds to the average Joe. Margin levels are extended and complacency has been high, which might lead to an exacerbated decline to the downside. If the pain is too great, drop out now and spare yourselves from the agony of having to work through the sludge.

At the core of the problem is “Fed tapering” coupled with “Emerging markets” not emerging anymore. The Yen carry trade is unwinding, the dollar is strong and treasuries and precious metals are safe havens, all classic bear market traits. The liquidity that drove stocks to fantastic heights is being withdrawn, frankly. Hopefully we can get it back soon, else selling will beget more selling and then people will call for a crash scenario to “put in a firm bottom.”

It’s all a ridiculous process, one that I loathe, sponsored by a media who don’t really know anything about making money in the markets. They are only interested in witnessing your pain.