Making Sense of the Mayhem

I have the view that markets have little to do with corona virus. Markets were overvalued and it was only a matter of time. I have written ad nauseum about the ‘’X’’ factor. We know not what it might be but as they say ‘’it can come like a thief in the night’’. It comes and each time there is panic.

Where to now will depend very much on your holdings in the market. I have sat on 100% cash for some time and so I look for the bottom. I scour the market, but I am not quite ready to buy. More of that another time.

Today I would like to focus on ‘the cliff’’. I know a bit about it as I have been over it a couple of times in my long history of trading. But in my early days and so not much damage done, and I live to tell the tale. I have experienced the cold sweats, the manic selling. Yes, I was part of the mania. Now you might call me a ‘scary cat’’ as I am out when the market starts to look toppy or rickety.

Let’s look at the current market action and see what is happening:

February 21:

February 26:

March 9 or there abouts:.

There is no told you so here. It is basic if you are at the top of the mountain it is a long way down if you trip – and ledges are few and hard to grab hold of.

Have we reached ‘’capitulation”? I don’t know.

I have watched with great interest media – including Facebook which is a relatively new phenomenon for the markets, and it shows peoples raw emotions. It truly reflects sentiment. I see many brave projections. But not much bearing of souls – yet.

We saw some capitalization in Europe and the USA overnight with markets falling about 10%.

Capitulation does not happen in a day. It takes a low low wave five to clean out the amateurs – big and small – and to bring markets to their knees. I see pain but I not see much ‘’weeping and gnashing of teeth’’ yet.

I see predictions of where the markets will find foundation. We will know it when we see it. I would not even call this a ball market – maybe a baby one so far. And I would not waste my time on predictions right now. We need to see more data that will give us reason to try and make a sensible call.

One lacking ingredient in raging bear and bull markets is patience. It took me a lot of years to realize the experience of success in the markets needs to feel boring. Routine. Systematic.

We need to let the drama settle and we will find great long-term profitable buys.
They will be in abundance. Sit tight

Enjoy the ride

Tom Scollon