Aug 21

The Market Today 8/21/15: Panic


What a week this was! A week ago today, everything was great. Market was near the highs, shrugging off Greece, and China. The news of a slow down in China’s economy are ramping up, and finally having an effect on our markets. The selling that we have seen over the last three day’s, has been strong. It certainly intensified today, and really in the afternoon. There was a sense of panic in the air. Most investors have not been used to seeing this much selling. Afterall, it has been a whopping seven years since the financial crisis began. Everyone seemed to forget that the market can actually move lower! Who can blame them? Any sell off that we have seen over the last few years, has been made up in just days! We saw some strong selling on Wednesday, then Thursday, and it really ramped up today.  Yesterday, the market closed below the very important 2,040 on the S&P, closing at 2,036. I felt we would see some selling following yesterdays close, but I did not expect the intensity, and the amount of selling that we saw today. Following a day like today, and it being a Friday, I would expect investors to get scared over the weekend, and see the market sell at the open. It is here, that I can determine if the selling is over for the short term, or more ison the way.

Panic: Stocks

There was panic in the air today! The Dow closed down over 530 points, and the S&P closing down about 65! Following the break of the important 2,040 support yesterday, the next support is 1,970. That is exactly where we closed today. Should we get a close below 1,970, the next support is at the 2014 low of 1,820! Should the 1,820 level break, things will get ugly, real quick. This would signify that much greater problems are out there, just not visible. My plan of attack right now, are to wait and see if these support levels will hold. Should they hold, which I expect them to hold, I will then buy aggressively. I have my clients in mostly cash, just waiting for this. That being said, lets put this into perspective. Today, we just hit the 10% level, thus, we are in correction territory. This is the first 10% correction since 2011!! There is no reason to panic!! This is healthy. I would be more concerned if our economy looked horrible. It doesn’t, it looks really good. So, there we go. Sit back, and relax. There is no reason to get overly concerned. Based on the plan of attack I mentioned earlier, go by that! Until then, let the market run it’s course.

Panic: Bonds

While there was panic in the stock market, there was buying in the bond market! Interest rates on the key 10 year interest rate closed at 2.05% Should the selling in the stock market continue, you can reasonably expect the interest rates can go as low as 1.85%. I do not see this happening, but the case can be made. If you are looking to get a mortgage, now is the time. This will be the last time we see interest rates hit this low.

Author Sean Rhodes is an expert in financial markets and helping you manage your money. For a no-risk consultation, check out Sean at the following link for more information, and expert advice on portfolio construction, and helping protect their portfolio’s, during time’s of market panic!

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