Knowing that the markets were in an odd type of corrective mode, we said to “trade accordingly,” which means, smaller positions.
By the end of the week before last, it was apparent to all that the broader markets were in trouble and the odds were high that more selling was to come. Last Wednesday and Thursday, the speed and extent of the selling that followed was surprising.
The broader markets and sectors stabilized by last week’s end, but there was nowhere to hide from last week selling.
The declines last week ranged anywhere from almost 2% to as much as almost 7%. And from that October 1st apparent calm before the storm, the NASDAQ composite is down almost 9%, NASDAQ 100 almost 8%, the Transportation Index 7 ½%, and the S&P 500 almost 5%. The Russell 2000 is down 11% from its high.
We stopped out of all our positions; however, all optionable ones profitably because of our great entries and legging into covered calls.
There is no doubt that the vertical drop in equities from the recent high caught the majority’s by surprise — including us — when the fire bell went off.
It’s likely that the only individuals that saw the top before it happened were those that have been calling for the top for about six years now.
The others are the marketers that will sell you their latest indicator package.
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