Ugly Friday created a very ugly Monday.
The fear index, aka the VIX jumped 42.3 points from Friday’s close of 23.39 to its high of 65.73 on Monday, before dropping back to 32.81, at writing.
I don’t think we’ll see it get to that level again. But, it all happened so fast, I’m not sure it gave folks enough time to panic.
In any case… I suspect we are closer to the end of this short-term decline phase than to the beginning of it.
Be Patient
There is no urgency to step up and buy.
The McClellan Oscillators (NYMO and NAMO) still have plenty of room to fall before the reach extremely oversold levels (-60 or lower).
But, we are nearing the point where it will make sense from a risk/reward perspective to start adding long positions.
If the S&P declines 100 points or more, then aggressive traders can look to buy some of the more beaten down names.
Gold and silver, for their parts, are trading higher. The mining stocks are underperforming the metals. So, I’m not sure the gains in the metals will hold…
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My Advice
Right now, the best advice I can give is to remain calm, be patient, and don’t lose your head.
If you’re stressed about your positions in the markets, you either have too much money at stake, or your risk management systems need to be looked at.
Now is a great time to do that.
Remember, this is the market environment where traders thrive.
It’s getting interesting again.
We’ll wait for the dust to settle a bit and see where the best opportunities for reversion-to-the-mean trades lie.
Be on the lookout for my next video edition of Market Minute. I’ll get into all of this more then.
In the meantime, if you use X (formerly Twitter) make sure you’re also following me there, @JeffClarkTrader.
Best regards and good trading,
Jeff Clark