Could today have been a more obvious “sell the news event?” Of course it wasn’t obvious to me in the morning, and if we closed at the highs I wouldn’t be writing this, but come on. Could this have been any more obvious?
The S&P 500 fell 1% from its highs, and closed down a modest 0.11%. But the NASDAQ 100, which has been the leader of this market, fell more than 1% and had its second bad day in the last four sessions. This could be the top.
Buuuuuuut it might not be.
On March 21st, the NASDAQ 100 was up in early trading and fell from 2% from the highs. This one candle engulfed the 14 previous trading days.
There was no real news other than stocks fell, but the media paid attention and attached cause to effect.
The NASDAQ 100 is up 17.4% since March 21.
Two months later we had a similar scare with the NASDAQ 100 falling 2.5% on the day.
Once again, headlines followed the market’s lead.
The NASDAQ 100 is up 12% since May 17th.
Just a few weeks later, stocks had a really nasty day. At one point, the NASDAQ 100 was down almost 4%, with a swift afternoon selloff that looked and felt flash crashy. They closed off their lows, but still finished down 2.4%.
The headlines will a little louder after this one.
The NASDAQ 100 is up 9% since May 17th.
On July 27th, the NASDAQ 100 fell as much as 2.5% from its highs, before rebounding and finishing down just 0.6%.
The headlines weren’t quite close on the lows crazy, but this candle did not go unnoticed.
The NASDAQ 100 is up 6% since July 27th.
Which brings us to today. The FANG stocks are all in official correction territory, albeit of the healthy variety, but it’s starting to feel just like it did on the four previous occasions. This could be the top.
The NASDAQ 100 is still up almost 30% for the year and has enjoyed a remarkable decade, so I doubt anybody would be shocked if this marked a top, short-term or maybe even, cover your eyes, one that takes a little while to revisit.
There were at least four times this year where one could have made a compelling case that it was wise to reduce risk. But most people don’t reduce risk. They’re all in or they’re all out. And you can only do to so many times before your brain turns into actual mush. Sure, this could be the top, but it’s always good to remind yourself that every time stocks fall a little, it feels like they’re going to fall a lot, even if we know they usually don’t.