The Markets Took A Tumble Today
The stock market took a pretty big hit today. By midday the S&P fell 1.76%, the Dow Fell 0.75%, and the Nasdaq Composite dropped 2.89%.
As many of you probably remember, I’ve been talking about seeing a sector rotation beginning for the past several weeks.
But I’d like to say that the action we are seeing today isn’t exactly what I would call a sector rotation. It’s a big sell-off and we are seeing large swaths of capital leave the market.
The market started selling off early this morning with Tesla (TSLA), Visa (V), and Google (GOOG) — all taking big hits after their earnings.
And as the day has progressed, we’ve seen more and more selloffs in many sectors.
In fact, the only sectors that are up are Utilities, Energy, Healthcare, and Real Estate:
We can see some money rotating into these sectors that have received less attention this year, but broadly the market is selling off overall.
People are simply taking their money off the table today and for no reason or catalyst to spur it…
In truth, I’m not exactly sure what is going on. There’s been no event to kick off a big sell-off, yet investors are bailing out today in droves. And I know that’s probably not the answer everyone wanted to hear from me… But I can’t quite figure it out.
It could just be a little rug pull on market liquidity that gets fueled back up by the end of the week. But I am not trying to PREDICT anything based on the market action we are seeing today…
What I am trying to tell you is that I would not make any market decisions based on today’s actions. I don’t think there is anything to learn from this market action as of now.
I am saying this because I have already seen too many people say “Oh, this sell-off means ______.”
In my opinion, making a trading decision based on a market selloff that doesn’t have a clear catalyst or a clear chain reaction is just gambling.
Again, I still think a larger rotation is at play here (especially when you consider how well small caps are holding up compared to large caps the last 10 days), but I want to distinguish that from what we’re seeing today.
The difference is this:
In a “normal” rotation, we would see high flying sectors sell-off and we’d see under-appreciated sectors again around the same value being wiped out in the losing sectors.
Instead, today, we’re seeing just a fraction of the total deficit made up in other sectors which is what I would consider a true market selloff.
We have billions and billions of market cap erased and flowing out of key areas with nothing else having even close to those inflows, meaning it is not just money rotating from one area to another, it’s money rotating out of the market altogether.
Now, that doesn’t mean it is going to continue selling off. In fact, you could argue that with light liquidity right now, there’s ample opportunity for buyers to step back in…
But I think recognizing the difference and not going “all in” on a possible sector rotation before we’ve seen it complete is an important step in this process.
And that’s a core part of my trading philosophy if you’ve been following me: I am almost never trying to time up or even “get ahead” of market moves. I am, instead, following proven momentum with the belief that I can buy high and sell higher.
So today, when there’s nothing available to “buy high”, it’s a good time to sit back, watch, and take it all in.
—Nate Tucci
P.S. Don’t worry, just because I am taking one day off from the action, doesn’t mean I am on the sidelines for long. Tomorrow could bring a lot of clarity to the markets and some great opportunities to trade too!
I have a short list of stocks for our Jump Trades that could still fire this week and target around 200%…
