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I've been involved in several high-intensity meetings in the past few days, as you might imagine, because the selling probably isn't over.
Normally, I'd be very concerned – but in this case I'm not – because the onslaught is entirely driven by technical trading, as opposed to the more important underlying fundamental picture that leads to clear, sustainable profits over time.
Still, you've probably got a number of questions on your mind…
Q: Is the Selling Over?
That depends entirely on two things: (a) the computerized programs that drove the Dow down more than 1,500-plus points in the worst single-day fall in market history have to stop selling, and (b) the Fed has to stay out of it.
The former is pretty straight forward. The markets were selling off in a relatively orderly fashion until the last hour, when computers took over and sent the major averages into free fall. I don't have all the data just yet, but this is usually consistent with risk arbitrage programs reaching pre-programmed limits or some complex balancing between positions. Either way, it's so fast a human can't keep up… or stop it.
The latter is all about the Fed. Last week Team Yellen noted that inflation was on the uptick and that average hourly earnings rose 2.9% in January. That prompted "position" traders to reassess the Fed's next move as more hawkish and to get ahead of that by selling, which added significantly to the computerized pressure already building.
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In the scheme of things, the markets are still up an average of 17.5% over the past 12 months as I write this – so this really only took about 5% off the top. It's also worth noting that trading desks didn't report any major snafus, which means the markets themselves took this in stride.
The real damage, as usual, is to investors' psyche – present company excluded.
Q: Could It Get Worse?
About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.
I thank you and your team for your good and very profesional advice to people Who are not knowledgeable in the money market segment. Keep Up your good work.
Richard