Ticks

Yesterday the market had a bad day.  I don't have time to go back and look at the exact number of days that we've gone since we've seen something like a 300 point drops in the Dow or a nearly 1.75% loss in the S&P 500, but I know it's been a  long time.  Yesterday's decline completely wiped out the gains for July and put the Dow Jones Industrials negative for the year.  It also put stocks right at the doorstep of short term support.  I was going to write a longer piece today about what I thought yesterday's decline might be telling us but I think I want to see how we trade today before trying to draw too many conclusions.  My 28 years of doing this tells me that trading like we saw yesterday rarely flames out after just one day.  If we are going to see a change of trend, then probability would suggest that today would be similar to what just occurred.  Futures started today down big.  Then  today's jobs report,which again showed a greater than 200,000 gain, hit and market's have rallied a bit from that.  Given that it's a Friday in the summer I want to take a step back and see how we end up now before drawing too many conclusions.

There was a saying from where I grew up in Indiana that goes something like this,  "Davey's got more problems than ticks on a hound".  For those of you unfamiliar with what that might mean, hound dogs have long been used as hunting dogs.  That means they head out in the brush, usually looking to flush or tree prey.  When you do that as a dog you get ticks.  You get enough of them then they start to bother you because they itch.  Often they attach themselves in places that the dog can't scratch them off and it can put the dog in a bad mood because of the irritation.   That may be what's bothering the market's right now.  We may be seeing a lot of small problems that have been left to fester and are now giving the market, particularly the bears, an irritation that starting to bug them.  We flagged some of these concerns back at the end of June here.  That post was written before the Israeli's hit Gaza and somebody shot down a passenger jet in Ukraine.  Or it could be that we've simply started the "dog days" of summer and it's just time for stocks to go down for a bit.  At any rate I'm going to let the dust settle today and try to read these tea leaves.  I'll be back next week with some more thoughts.

People will ask me what I do on a day like yesterday.  Most of the time it's nothing.  I don't like to sell into panics and often you will get an opportunity to sell at higher prices if that's what you want to do.  I also worry less about a day like yesterday since the vast majority of what we own for clients is in ETFs.  We have reasonable cash in most client accounts and strategies.  That makes a day like yesterday a bit more tolerable.

*Long ETFs related to the S&P 500 in client and personal accounts.  Long ETFs related to the Dow Jones Industrial Average in a few client accounts as legacy positions.