Today Was Not A Panic

Not all down days in the market are panics.

In early February I called that event a panic, it was a fast decline that true to most panics took back much, but not all, of the decline in short order. While I am very cognizant of the explanation fallacy (if the market went down it there must be a reason) there appears to be concern about both the tariff situation and what seemed to be a more hawkish stance taken by the FOMC after Fed Chair Jerome Powell's first presser.

The market started out lower of course on Thursday and deteriorated into the close to the tune of a 2.52% decline for the S&P 500. I am not putting undue emphasis on one day's movement but over the last few weeks the one way nature of the market has gone away and I would not be surprised if the peak of the cycle turns out to be Q1 2018. This is not a call to change investment process, I will stick to my process which relies on either a breach of the 200 day moving average by the S&P 500 (still about 59 SPX points away), an inverted yield curve (doesn't seem like that can happen for quite a while) and/or the 2% rule (average 2% decline three months in a row which doesn't happen all that often) and for now March would only be the second down month but there is still a week to go.

I obviously don't know what will happen but this little stretch is much dicier than what happened in early February and to be crystal clear this could end up being nothing. Not knowing is the best possible reason for maintaining a disciplined approach.

The first of my indicators mostly likely to trigger right now would be a breach of the 200 DMA. For anyone who was not reading the blog the last time this happened, if the market looks like it will close below the 200 DMA for a second day I will place some sort of defensive trade toward the end of that second day; either selling something or buying an inverse fund of some sort. The point is to start slow in case the market recovers. True bear markets give you a long time to get before they get to the point of being down a lot

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