A cute female colleague was late at work during a snowstorm.
“Man, the road was so slippery that I walked forward one step and slipped backward two steps”
Everyone felt sympathy for the young lady, even the boss came over to ask whether she is ok
“Then, how do you get to the office?” A smart Indian Ph. D. cannot help to point out the logic flaw embedded in the statement.
“Oh, I was so angry and walked right back home” snapped back the lady.
Trading is like walking in a snowy day; you make some progress and then are pulled back a little bit. Not only one has to have the tenacity to keep trading, but also one needs to know which directions to go.
The sudden sell off of today is not that all too surprising, given the market has risen so quickly. What surprise is the intensity, it is said that pullback of today’s has to go back a month earlier. Obviously, technical played a big role today, when DOW dipped below 13000 and SP 500 was under 1400 level, the selling accelerated. Maybe a lot of programming tradings were involved.
There are a lot of reasons as what trigger the sell off. Oil price, monetary regulation etc… Just from the perspective of trading, maybe, it appears that the market has hit the ceiling short term, it has tried last few days to “break out” but be send back promptly. So, the smart thing to do is to take the profit.
If we believe the market is still in good shape even with today’s pull back, which I am one of those believers, then, it is the time to be prepared to buy at dip. Look at those strong stocks and be ready to jump in once they trace back to the support line.
Fertilizer companies seem one of those strong sectors, so are the steel and mining equipment. Some technology company as well as transportation companies looks good too.
It is important how the market react after a sell off like today, if we have a strong reverse tomorrow, you can basically count out today as an aberration. If there are more selling tomorrow, then, one needs to be alert.