A Time for Grownups – the Replay of 1929 at Hand?

After the Close: When the Market Gets Serious

Well, this was sure a nasty one, eh?

Down more than 1,800 points on the Dow, with percentage losses elsewhere looking equally grim. Not exactly the sort of Thursday that makes you want to whistle your way out to the mailbox.

But this is precisely when we need to put on our grown-up pants. Panic is not a trading strategy, and neither is pretending the market owes us a happy ending.

There are three simple questions worth asking tonight:

1. Will the market halt its decline at the red trend arrow in our first chart, just below the word “Today”?
2. If that support line lets go, how bad might things get?
3. And when might the next serious downside target arrive?

The answers are simple enough. Living through them may be another matter.

Start with the first: The market will stop when it stops. Brilliantly unhelpful, perhaps, but considerably more honest than most television market forecasts.

Which is why we have been out of the market since before the 85-Day Moving Average blew out. Our job isn’t to catch every last dollar of an advance. It’s to have enough capital left to recognize the next opportunity when it arrives.

And that brings us to Question Two: How bad?

The historical comparison in this after-the-close view should give everyone something to think about:

Now, before anyone starts digging a fallout shelter beneath the brokerage office, remember that historical comparisons are scenarios, not guarantees. Markets rhyme more often than they repeat. Still, ignoring an ugly rhyme simply because the last verse was unpleasant is not especially bright.

Which brings us to the third question: When?

That one is considerably tougher than where.

If the 200-Day Moving Average blows out next, the technical picture gets more interesting—and considerably less comfortable. But identifying a possible downside destination is one thing. Putting a reliable date on its arrival is quite another.

For that, our reading in the Peoplenomics Aggregate offers another thinking point. Pay particular attention to the yellow stars:

The stars aren’t a promise. They’re markers worth watching as price, time, and market psychology work through the current unpleasantness.

We don’t offer investment advice, other than advocating an abundance of caution. Always. Not merely when the crap and the rotating thingy are in cahoots.

For years, the 85-DMA has been our personal “Kapok at the ready” number. An old sailor doesn’t wait until the boat is underwater to go looking for a life jacket. Markets deserve the same respect.

Tonight’s Global Watch

We’ll be watching Asia tonight. Could the KOSPI take out 5,000? And if it does, will that signal stabilization, another leg down, or simply a market looking for somebody else to share the indigestion?

Then comes Europe tomorrow morning, followed by the U.S. employment numbers at 8:30 Eastern—an hour before our opening bell.

Plenty of opportunity for the overnight markets to change their minds. Possibly more than once.

And there’s an important historical reminder here: Markets seldom crash directly from their peaks. Major declines often develop through successive support failures, relief rallies, and renewed selling. The process can be deceptive, particularly when investors are desperate to believe the worst has passed.

Another useful spectator note: When a market reaches critical support, it may execute several convincing fake-out moves before revealing its final direction.

A rally isn’t necessarily a recovery. A broken support line isn’t necessarily the end of the world. And one good day after a terrible one doesn’t automatically mean the all-clear has sounded.

This is where slow-speed trading, disciplined position management, and a healthy respect for uncertainty earn their keep. There’s no prize for being first into a bottom that hasn’t finished forming.

Capital preservation is what gives us the luxury of being patient.

We’ll have more tomorrow, after Asia, Europe, and the jobs numbers have had their say.

For now, anyone else up for pizza?

Write when the wine’s poured,

George@ure.net