No surprise that the markets sold off today after the news came out. Many big traders are trained to sell first and ask questions later. What is interesting to me is that, after the initial bounce from the opening low, stocks sold off again to even lower levels. I will continue to watch where the stock markets close today and what happens on Monday after everyone has had a chance to consider the implications of the Trump Covid test results.
After my prior post, when I said I was raising cash because the market run-up had just gone too far, US stocks climbed a few more days and then dropped hard. Now, stocks have recovered some of the drops and are hovering at a kind of pivot point. The S&P500 is near the 50-day moving average and just below the VWAP (Volume Weighted Average Price) for the last month or so. What this means (in English) is that the buyers and sellers over the last 30 days are roughly in balance. The bulk of stockholders are at break-even or a little better/worse.
If markets drop from here, buyers could lose confidence and join the sellers. Conversely, if markets rally from here, sellers could lose confidence and cover their bets, thus joining the buyers.
We participated in part of the stock bounce over the last month. I didn’t really time the bottom. I’m still waiting to get back to our long-term asset allocation methodology after market volatility subsides somewhat… probably after the election. In the meantime, we still hold 70% or more in cash.
Be safe and have a great weekend.