Stocks Get Messy, Dip-Buyers Get Crushed Again

What would the Fed do?

The Dow fell 4.1% today to 23,860, plunging 480 points in the last hour. This 1,033-point drop was the worst drop since, well, the 1,175-point drop on Monday, which had been, as it was endlessly repeated, the biggest point-drop in history – and irrelevant at these ludicrously inflated levels of the industrial average.

So now:

  • The Dow has dropped 10.4% from its all-time high on January 26 and has entered “correction” territory (defined as -10% from its recent high) over five trading days.
  • It closed 385 points below its Monday close: lower lows.
  • It’s down 3.5% for the year and back where it had been on November 29.
  • All of the 30 Dow components were in the red, with seven dropping more than 5%. Losses ranged from Exxon Mobil (-1.1%) to American Express (-5.6%).

This used to be standard practice after a dizzying surge of the type we had. Unwinding the last 10 weeks of a rally is no big deal. But those spoiled by the record 410-day streak without a 5% selloff are now struggling with letting go of an illusion: that stocks are a low-risk high-reward bet.

But there is something that is starting to get a little ugly. Today’s selloff has crushed again the most cherished way of making money in the stock market since the Financial Crisis: dip buying. There were three messy selloffs over a span of five trading days: Friday, Monday, and today; each time, prior dip buyers that didn’t get out of the way got slammed.

The S&P 500 dropped 101 points, or 3.75%, to 2,581, about half of it in the last hour. It was the worst drop since, well, Monday’s 113 point drop.

  • The S&P 500 closed 2.5% below Monday’s close. Lower lows. Dip buyers crushed.
  • It’s down 3.5% for the year and back where it had been on November 21.
  • It’s down 10.1% and in a correction. The last time the S&P was in a correction ended on February 7, 2016. At the time, it was down 19%.

The selloff is starting to show up on long-term charts. This chart, which captures the bottom of the last crash, shows just how steep the current selloff has been in point terms – 187 points in five trading days – compared to the selloffs since 2009, but in percentage terms it fits right in:

The Nasdaq fell 275 points today, or 3.9%, to 6,777:

  • It dropped into the red for the year, down 1.8%.
  • It took out the Monday close by 2.7% and is back where it had last been on December 6.
  • It is down 9.7% from the peak on January 26, and thus not even in a correction.

What’ll happen next?

I said on Monday that the dip buyers would come in. On Tuesday, courageous dip buyers rode to glory during very volatile trading that ended with a massive surge. But those that didn’t get out of the way got crushed today.

Now the market is waiting for the new wave of dip buyers. And they will show up. Wall Street is encouraging them to. The whole industry is.

I just got an email from Bankrate.com with a commentary on today’s “slide.” These folks don’t usually comment about stocks. But today, their chief financial analyst Greg McBride came out swinging: “With such strong economic and earnings fundamentals, each dip is a buying opportunity,” he said.

This has been the rule for years. Dip-buying has been rewarded since March 2009. And this rule will continue to get trotted out. Now that the market is down 10%, it might even attract larger funds set up to profit from big selloffs. No one knows when they will show up in numbers large enough to reach critical mass. But they will, and they will cause the index to jump. It’s only a question of when.

But the trend has turned ugly. Dip-buyers that didn’t get out of the way quickly got crushed each time. There will be wave after wave of dip-buyers, but if they keep getting crushed, they will wait longer and longer before they jump in, and they will have shorter and shorter time horizons, jumping out more quickly and more nervously. If this goes on long enough, and dip-buyers lose interest, that’s when the market gets in real trouble. But it will take many more waves of crushed dip buyers before it gets there.

What would the Fed do?

Those clamoring for the Fed to step in and do something sound ridiculous. “Silly crybabies” — that’s what comes to mind. Stock indices quadrupled since March 2009, and the five-day 10% swoon so far represents only a minor dip in the long-term picture. See chart above.

There is no telling what a spooked Fed might do, but this selloff is far from spooking the Fed. The Fed has been attempting to tighten “financial conditions,” which include yields and risk premiums, which had been at record lows, and which the Fed has been trying to raise. The Fed has also mentioned elevated asset prices as an issue and is likely welcoming a civilized decline. A disorderly crash would spook the Fe — but I think, for now, most voting members of the policy-setting FOMC will brush off this sort of post-blistering-rally selloff.

And who was selling stocks and who was buying them last week just before the selloff on Monday? Answers emerge. Read…  Who Was Selling Stocks Last Week Before the Monday Rout?

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  108 comments for “Stocks Get Messy, Dip-Buyers Get Crushed Again

  1. Maximus Minimus
    Feb 8, 2018 at 8:23 pm

    There is only one variable left: the FED and fellow central bankers. Will they bail out the market as usual (contrary to their mandate), or let the market decide.

    • van_down_by_river
      Feb 8, 2018 at 10:33 pm

      The Fed see only a healthy correction in the market and are not concerned. On her way out the door Yellen said asset prices were elevated. They have no justification to reverse course (as they have so often in the past) and might let the market fall 30%, 40%, 50%, 60%. We can’t know how far the Fed will let the market crash but given what we know today they will let it crash.

      The market will fall relentlessly and eventually working class Americans will succumb to their human emotions and sell near the bottom. Then, after hard working people have lost half of their life savings, the Fed will announce a new round of QE and drop interest rates. Scumbag hedge funds and other speculators with inside information will ride the QE wave back up – wash, rinse and repeat. Harvest the savings of wage earners and make sure they can NEVER retire.

      I used to think this dynamic (creating massive bubbles) was merely the result of Fed incompetence but I will admit now it has a more sinister feel. After destroying the lives of millions of people and likely causing countless untold suicides, alcoholics and drug addicts Ben Bernanke decided to repeat the cycle. He pulled out the exact same playbook used to destroy people’s lives in the two previous bubbles.

      Ben had an excuse for the first round of monetary stimulus and low interest rates but he had no excuse to hold rates at zero and accelerate the money printing after 2011 – the system had stabilized so why did he throw monetary gasoline on the economic fire?

      We have seen the same story play out twice before. History is not just rhyming – it is repeating exactly to the letter. We have reached the chapter of the story where powerful, wealthy speculators have fled with their loot and retail investor have bet all-in with their life savings and are left hold the bag of pooh.

      The Fed will pop their enormous asset bubble. Retail investors will sell out at huge losses and when every last penny has been squeezed out of mom and pop the Fed will make their big announcement. Mom and pop will be so disgusted they will stay out of the market as it is once again inflated for the benefit of the investor class. Of course Warren Buffet will give his usual “I told ya so” lecture to mom and pop as they listen addicted to pain pills.

      Welcome to America (I hear we’re draining the swamp – gotta have some place to put in the new cesspool).

      • Tom
        Feb 9, 2018 at 8:20 am

        It seems simple:Keep the market going in the right direction(DOWN) and dare the fed to raise rates.

      • Hirsute
        Feb 9, 2018 at 12:56 pm

        You now admit now that the Fed’s actions have “a more sinister feel,” but you and others on here chide RonJ for his deep state reference? Looks like some people either have their heads completely in the sand or, to a lesser extent, some serious cognitive dissonance issues.

        Deep state or not, our monetary system – by extension our economy, is controlled by an unelected banking cabal. It used to be commonplace to dismiss such rhetoric as simply a tin foil hat conspiracy theory, but we see now that it is exactly the case. The Creature from Jekyll Island owns the Swamp. It owns us. Please tell me differently.

        • Coaster Noster
          Feb 10, 2018 at 12:10 pm

          Analogies don’t help. “Jekyll Island”??? What can anyone do with that?
          Name names…real names. List the total people, the total 100 persons that control the world. Let’s not shield the 100 (or, is it 200? …or 50?) behind huge billboard terms (“unelected banking cabal”). Chamath Palihapatiya, a billionaire, has railed against the “one hundred people who control the world”. Who are they? Why let the Rupert Murdochs of the world, shield them?

          We report temperature and rain every day, throughout the world. Just like cities on the map, what these people own, how much their wealth increases each day (in real dollars, not percentages) these should interest people far more than “gun control” and “abortion” and the defense of “freedoom” (<<<< which does not exist in a crowded world).

        • d
          Feb 10, 2018 at 6:26 pm

          “Analogies don’t help. “Jekyll Island”??? What can anyone do with that?
          Name names…real names. List the total people, the total 100 persons that control the world. ”

          They cant, as it is a fairy story.

          The closest you get is the likes of Blackstone who are named and know, they control/own 1 % of the equities on the planet.

          This is public information.

          Your real problems lie in the axis of, Moscow, Tehran, and Beijing. Very opaque, VERY Oppressive, and they have joined hands.

          Further, they can make, and keep, long-term objectives, as their administrations are not accountable to, or controlled in any why by, their populations. There is no rule of law in those countries, an enabling factor.

          Russia had a little hiccup in 1991. Now they are almost back to where they were and a bigger problem/threat than they were. The long term Russian objective has not changed since Catherine the great. Global domination, by any means.

          No mater what the administration of Russia since her, they have still all used her play book.

          Counties with systems like America, can not compete with that, when run by a corporate owned duopoly.

  2. RonJ
    Feb 8, 2018 at 8:33 pm

    2 years ago, all it took to halt the decline were Soothing Words from Fed officials. They seem much less inclined to do that now.. Deep State manipulation?

    • Frank
      Feb 8, 2018 at 8:57 pm

      Yes it’s the Deep State again.
      Obama,the Clintons,the FBI,the CIA,the Justice Dept,State Dept,the NSA,maybe even he National Park Service are all are conspiring to sabotage the Executive branch of Govt.

      • Elangovan Sittrambaram
        Feb 8, 2018 at 9:27 pm

        Very very perceptive. You forgot a few.

        • alex in san jose AKA digital Detroit
          Feb 9, 2018 at 2:13 am

          He forgot George Soros.

        • Duke De Guise
          Feb 9, 2018 at 12:28 pm

          And George Clooney…

      • California Bob
        Feb 8, 2018 at 9:34 pm

        The real ‘Deep State’ are the oligarchs running the country: the Mercers, the Kochs, Goldman Sachs, etc., etc.

        • Mark
          Feb 8, 2018 at 10:23 pm

          The election of DJT definitively proved there is no “deep state” as no competent “deep state” would have allowed it to occur.

          I believe in this about as much as I believe the US government has UFOs and alien bodies in some secret hangar in Nevada.

        • Feb 9, 2018 at 3:14 pm

          To Mark,

          I BELIEVE (with much evidence) that the Deep State is so deep, so well-entrenched, and living with the view of centuries and not decades — that it is irrelevant, ALWAYS IRRELEVANT, which person becomes President.

          Mr. Obama said change we can believe in, CHANGED NOTHING, and replaced HIS economic team with Goldmanites, etc. And Mr. Trump, running on a populist platform, has SO MANY Goldmanites in his administration that you really must distrust his ¨populist¨ bona fides.

          Messrs. Obama and Trump could not be more different (apparently) but the REAL DEEP STATE is content to work with either.

          The deep state, as I said, has centuries deep roots. Back to 1694, and even beyond. The birth of the BOE . . .

      • Night-Train
        Feb 8, 2018 at 10:23 pm

        I never have trusted those park rangers with their little Smokey the Bear hats.

        • HD
          Feb 9, 2018 at 1:09 am

          It’s always the ones you least expect.

        • Raging Ranter
          Feb 9, 2018 at 8:11 am

          Those municipal parking enforcement guys in their fascist uniforms – who are they talking to when they furtively mumble into their radios? I’m no fool – this goes right to the top.

        • Duke De Guise
          Feb 9, 2018 at 12:30 pm

          Actually, I pick up those messages on the receiver the CIA implanted in my teeth… so annoying!

      • Guido
        Feb 9, 2018 at 3:47 pm

        A person makes a hypothesis and you decide it has no value at all. I am surprised how you can be so sure that the deep state theory is wrong. It might very well be, but to dismiss it outright (unless you happen to be deep state :) or the Soros fellow or some such guy with definite knowledge) shows a bias that you accuse the original poster of when you make the sarcastic comments.

        What we all know is what we’ve been fed by MSM. None of us has any clue about who controls the system.

      • Brian M
        Feb 12, 2018 at 1:52 pm

        I hear the Draconians and Lizard People are also involved

    • van_down_by_river
      Feb 8, 2018 at 11:06 pm

      You guys and your “deep state” – I would be more concerned about the shallow state right in front of you. Congress and Potus just passed new tax legislation that was written exclusively by special interest lobbyists. The “shallow state” gives special interests free reign to write our laws and rule over us. Laws against stock manipulation got you down? Hey no problem just wright new legislation making stock manipulation legal and pay congressmen to vote your bill into law (this actually happened).

      Special interest who wrote the new tax law are concerned only with their short term profits – they care little about what happens to the rest of us in the long run. So now the government is ramping up spending and cutting tax revenues and running up enormous deficits during a period when the economy is supposed to be booming – enormous boom time deficits!!!!

      Special interests made their quick buck but the high is already wearing off. Now we are left with the consequences of those enormous deficits – never ending inflation to keep the debt manageable.

      Just keep doubling down on bad ideas and be optimistic that somehow it will all just work out. My disgust of the lazy is acceptance of corruption is now nearly equal to the corruption itself. I’m getting out, I want off this ride, you guys can stay and gorge on your free lunch but I’m making plans to get the hell out.

      Enjoy your military parades on the moon or whatever new extravagance Trump is proposing today – I hope it will have been worth the cost.

      • van_down_by_river
        Feb 8, 2018 at 11:07 pm

        “write new legislation”, sorry grammar police.

      • alex in san jose AKA digital Detroit
        Feb 9, 2018 at 2:15 am

        He’s proposing a Bastille Day parade. He has zero sense of irony.

        • Anon1970
          Feb 9, 2018 at 1:21 pm

          And probably no knowledge of what happened to the Marquis de St. Evremonde in “A Tale of two Cities”.

      • Tom T
        Feb 10, 2018 at 4:04 pm

        Sounds like the van is heading south real soon. Check out the small villages just north Acapulco … you’ll find a good woman there too.

  3. Tom
    Feb 8, 2018 at 8:42 pm

    Oh no those ugly fundamentals are raising they’re ugly heads.

  4. Top-GUN
    Feb 8, 2018 at 8:51 pm

    Hmmmmm
    Market goes down 10% and it’s a Correction!!
    Market goes up 10% and that’s just normal!!

    • Feb 8, 2018 at 9:13 pm

      It’s worse: Market goes down 5% and the wailing starts. Market goes up 20%, and it’s normal because its based on “fundamentals.”

      • Memento mori
        Feb 9, 2018 at 12:04 am

        All media cooperates to scare the hell out of the plebes as the world is going to end if the stock market goes down, this creates the necessary conditions for the Fed to print money and give it to their cronies without causing social unrest. Keep commuting to your daily cubicle in that office tower.

        • will
          Feb 9, 2018 at 1:45 am

          Hey, don’t knock those cubicles, they have a nice view! – of the boss who has a desk by the window..

        • Lenz
          Feb 9, 2018 at 1:52 am

          If the market fell, wouldn’t that also mean massive job loss?

          You get social unrest if you continue to print, but you do as well if you don’t. The unemployed will end up on some sort of social welfare and a burden on society too, no?

          Considering how indebted we are as a society, where does the majority of interest lie? And i’m asking as a person who believes in Libertarian-ism and hoping that they allow deflation. Whats the point of working, when you see your life goals unattainable? Just to survive?

          Even someone like me, not trained in finance, can see just by following the market news for 2 years that we don’t have a “free market” either. Bush commented in an interview post 2008
          “I had to put aside the free market to save it”. what did he mean?

          What stops the fed from QE4?

        • JZ
          Feb 9, 2018 at 2:39 am

          Lenz, this is what’s going to stop QE4. The FED does everything to protect “capital”. If the economy sucks, consumers have no jobs and income to buy stuff, it will hurt capital. QE happens to “creat jobs” by preventing “BAD” business from going under. The thing is, if enough “BAD” business starts to thrive and compete with good business, wage will go up, labor will be rewarded and capital will hurt due to both wage inflation and unhealthy competition.
          They also worry about “trustworthiness” of $, if they QE too much, and lost trust, it will take “Volcker” effort to save it.

      • d
        Feb 9, 2018 at 6:13 am

        Depending how long it does or dosent take S & P could go 2250 2300 before it finds Major support on a TL dating back, 09 – 16 lows.

        if it breaches that line, look out below.

      • RangerOne
        Feb 9, 2018 at 10:34 am

        When put this way it’s all even more ridiculous…

        Equities have always been one of the most volitial investments, right behind investing in your own business.

        The only claim to their potential stability is as a long term investment vehicle as they come out positive in the long run if your diversified. Barring a long long term recession.

        I don’t quite understand average people fretting when they lose 10% in their 401k while you are 80-90% invested in equities. That position alone means you are a ways from retirement so a few years of down turn are irrelavent to you.

        A recession is only painful when it starts costing people their jobs. Otherwise you get a few years to keep putting into your 401k during a dip which will put you ahead in the end.

        • Pl'n'l
          Feb 9, 2018 at 11:42 am

          To add, it took until 1953 to break even in the 1929 stock rout.

    • Nick Kelly
      Feb 8, 2018 at 9:16 pm

      Note how much faster the down 10 % is than the up. That is the difference between imploding deflation and inflation, or between the time it takes to blow up a balloon and the time it takes to puncture it.

      No body is forced to buy but they can be forced to sell. It’s when margin calls go out and the guy can’t cover that stock gets thrown on the market at the market.

  5. Richie Rich
    Feb 8, 2018 at 9:05 pm

    I am 65 years young. Been a market player since I was 15. There has never been a time in the past I remember that buying stocks slowly that are beat up failed. Good time to slowly buy and hold if you have time to wait.

    • Frederick
      Feb 8, 2018 at 9:44 pm

      I disagree This market is WAY over valued and anyone who buys now will be disappointed when the markets drop 40 or 50 percent more They will recover but only in dollar terms

      • IdahoPotato
        Feb 9, 2018 at 10:28 am

        There are scores of good individual companies that are not overvalued and pay dividends.

        • Petunia
          Feb 9, 2018 at 11:01 am

          You are overlooking the level of computerized trading in the market. A company may be making tons of money but its market price can still be destroyed by a bunch of computers engaged in a food fight.

          During the great depression many profitable companies went bust when their banks failed, with their money in them. The companies were doing great until the stock market put them out of business.

        • Coaster Noster
          Feb 10, 2018 at 12:41 pm

          I agree with Petunia. They laugh about the people who say, “This time it’s different..” but indeed, this time it is indeed different. Fifty years ago, were there weekly options expirations, on hundreds of different stocks? Where did the television financial shows give the money made on selling calls that expired worthless? What about all the money that was accumulated with “sell a put with a 50 strike price, buy a put with a 40 strike price as insurance.”?? The laughable thing about “Nightly Business Report” and all such info-shows for the plebs, is that the situation is too complex to cover in a meaningful way! The shows spend more time introducing guests, than in dispensing information!!
          In my fumbling, bumbling way, I made $1400 last week, buying puts. Left $5k on the table, due to lack of conviction.

    • van_down_by_river
      Feb 8, 2018 at 11:29 pm

      I’m 54 years OLD and I’ve heard that buy-buy-buy mantra before. Fool me once shame on you. Fool me twice shame on me. Fool me a third time and well… I’m a fool if you fool me a third time.

      The S&P had nearly hit 2900 and S&P companies have had to resort to accounting shenanigans to report comparatively measly $125/share earnings. What justification is there to accumulate at these inflated levels? The promise of a greater fool? Low interest rates? Fed Put? All of the excuses to buy are drying up.

      Keep in mind when the market goes down companies throw in the kitchen sink, they stop purchasing their stock and they square the books to carry forward years of accounting indiscretions – that way they can issue stock options to the CEO at a really juicy, low strike price as the share price craters.

      This bubble has been pricked and has started to implode. Be ready when the Fed starts to inflate the next bubble. The Fed has stated mandates and goals but their stock and trade is inflating and popping asset bubbles.

      • KPL
        Feb 9, 2018 at 2:17 am

        van_down_by_river,
        “Be ready when the Fed starts to inflate the next bubble”

        Given the extraordinary work by the central banksters (Fed, ECB, BOJ, PBOC,BOE) acting in tandem and running a relay race, buying up all they could and lowering interest rates to ZIRP and NIRP,and generally creating an everything bubble, is it possible for these gangsters to do it again? IMO, the whole system of fraud is now dependent on the answer to this question.

        Because if the answer is NO, then we are in for a reset and it is unlikely to be pretty.

      • kevin
        Feb 9, 2018 at 8:15 am

        @van_down_by_the_river, you are too pessimistic and didn’t hear what Richie Rich said.

        This market correction is just a slight hiccup, which always happens every now and then. If you look at the broader picture, even real crashes like the 1987 Black Monday and the Great Depression hardly registers on the long-term charts.

        Mathematically, the broad indices will always have to go higher for every sharp reversal encountered. A 10% correction from 100 to 90 is only 10 points but for an index at 1000, a 10% drop is 100 points. Thus, that 666 points drop in the Dow feels big but in percentage terms it is all within expectations. In time, when the Dow hits 100,000, it will need a ‘massive’ 10,000 point drop to register a -10% correction. lol.

        Economically, all broad-market indices has to move up because of inflationary dynamics, such as perpetual money printing, ever-rising expectations of wage increases, increasing population and new technology etc. Now, we also have massive global debt which all CBs and govts are incentivised to inflate away.

        Hence, the veritable rise of the markets despite 2 world wars with hundreds of millions dead, all sorts of financial crisis, Kennedy assassination, watergate or some political scandals, 9/11 and countless earthquakes and natural disasters and still the stock market marches ever upwards.

        The only problem is you won’t live longer than the x-axis of the chart, so if you happen to retire just when a particular crash happens, then too bad, you were just born at the wrong time.

        Although, you might not be able to enjoy the fruits of your investments in your time, you can will whatever ‘worthless’ ETF shares you have to your next generation and tell them not to sell them no matter what. Who knows, eventually, when enough generations has passed on, one of them might even become the next Warren Buffet because he/she never sold those ‘worthless’ paper his great-grandfather willed him/her. lol.

        https://www.e-wavecharts.com/dowlt_index.gif

        • Sean
          Feb 9, 2018 at 11:38 am

          Sorry, but this just isn’t true.

          Look at Japan. Look at the Nikkei.
          Current inflated nominal levels of that index were last seen in 1991. Almost 30 years. An entire generation and NO gains. Markets do not HAVE to go up, even in the long term when inflation is desired.

        • kevin
          Feb 10, 2018 at 4:14 am

          Sean, so stick with US markets then. Unless your happen to be a Japanese and have a cultural factor to be nationalistically-oriented in all your financial activities.

          The USis still the world’s leading innovator with relatively freer markets and comparatively better institutions than say many Asian ones.

    • fajensen
      Feb 9, 2018 at 2:44 am

      This isn’t the time. One have to wait for Resignation to set in – When the business behind the stock in question finally admits it’s many sins and mistakes, discloses more write downs and the stock doesn’t drop further, then it’s “fundamentally” a buy!

      Just rushing into the dip at these levels to accumulate stocks, what will happen is that one will just get stop-lossed out on the next dip or (worse – if one thinks that those stocks has any inherent value) gets the all the free money tied into a bunch of losers, so when the real bottom, the resignation, eventually comes in and its a sure thing, there is too little to play with.

      And … Interest rates hasn’t even gone up yet for most “folks”.

    • kevin
      Feb 9, 2018 at 7:38 am

      @Richie Rich, I’d have to agree with you there, old man. Only one correction there.

      You should only dip buy into broad-based ETFs, NOT individual stocks.
      Individual stocks can and often do go bankrupt during severe crashes and all your investments go to zero.

      Not so for ETFs tied to the S&P500, Nasdaq, even the Dow etc. which can never go to zero because the issuers will simply replace those dead or shrunken constituent companies with newer ones. Therefore, over the decades, survivorship bias works in your favor while you sidestep specific company risks.

      I’d grant you the excuse that ETFs probably wasn’t around when you were 15, but they are a dime a dozen now, so you should switch for your own retirement safety, if you haven’t already done so.

      • Pl'n'l
        Feb 9, 2018 at 11:53 am

        And, when everyone is all in ETF/ETN World, will liquidity never be a problem? The more prolific these things become, the narrower the exits.

        Beware the future of Passive Investment strategies. Fads can sometimes overshoot the mark. I mean, would you buy a “Basket” of Crypto Coins about now?

        • kevin
          Feb 10, 2018 at 4:32 am

          Passive investing is hardly a “fad”. Its been around since the advent of (banking) deposit interest.

          Ask Warren and his mentor Benjamin Graham. If you don’t know what your doing in the stock markets or you do not have the privilege of a crystal ball, its is best for most people to simple park their funds with a broad-based ETF and not touch it too often. Best is not to do any trades at all because 90% of all trading is a fool’s game after you factor in cumulative transaction costs.

          I never said ETNs. Those are debt instruments with some counterparty default risks. Be careful of those.

          ETFs are quite well-established, and during times when liquidity becomes a problem, then don;t you think their underlying stocks would be worst hit? So which would you rather be in during those times of liquidity stress?

          I agree ETFs are not perfect. There is no perfectly safe investment vehicle in this world…maybe your tin can under your mattress and even that is subject to rats and fire hazards. lol.

          I’m saying it is relatively better to be in ETFs than in individual counters which are subject to specific company risks of default. I’m saying if you accumulate many different stocks over the years, it is equivalent to purchasing the index if you end up in the same corresponding weightages, so you might as well get the entire index and spare yourself the agony of getting hit once in awhile by a specific company going bankrupt. Given the vagaries of the modern economy with increasingly more disruptive technologies introduced, don;t you think its safer to be in an index than in a particular company (just look at Nokia, Kodak or even GE.)

          And No, I did not mention anything about Crypto coins. I only referenced to broad market equity-based indices. There is underlying stocks in indices. I have no idea what crypto has in underlying assets, besides a vague network effect.

  6. Northwest Resident
    Feb 8, 2018 at 9:48 pm

    What about pension funds. They were in deep trouble before this correction. Aren’t they heavily invested in stocks, having been chased out of bonds and treasuries due to not enough yield? If they were in trouble before, they must really be in trouble now. Same goes for insurance companies. Or is this correction not that impactful to anyone other than the dip buying suckers?

  7. Michael
    Feb 8, 2018 at 9:50 pm

    Except at a top

  8. Night-Train
    Feb 8, 2018 at 10:01 pm

    Any blood on the street? I haven’t been out today.

    • Feb 9, 2018 at 12:17 am

      I checked. Not a drop.

      • kevin
        Feb 9, 2018 at 11:38 am

        I don’t even sense any great fear in the markets. Seems to me most are just trying to time their entry at their hopefully near-term “bottom” prices.

        Turned on its head, I thought this current correction is a GOOD thing….really. I mean the past few months/years of almost constant rises is ridiculous as what everyone says, and now when the markets are correcting/consolidating, some people are wailing about it?

        Healthy corrections always bodes well for a longer-term strength in equities further in the year(s) ahead.

        Thus, shouldn’t we all be happy the markets is working….finally, right? lol.

  9. Insta
    Feb 8, 2018 at 10:05 pm

    Two weeks ago on Friday, January, 26th my boss sent me an email scan of a Wall Street Journal article talking about staying in stocks for the long haul and how great they are and how those sitting out are foolish. He knows I have moved all my 401k to the only cash option we have to protect principle.

    This generated a bit of thought over the following weekend in relation to FOMO (fear of missing out) because I was starting to think I might be able to get back in for a few months for some quick gains. I came to my senses and reminded myself that my estimates of long term value are much more important than any short term gains. With limits the 401k I knew I couldn’t get out any quicker than a month after moving into funds.

    Needless to say, I have been thinking of responding the email from my boss thanking him for being my shoeshine boy moment…. I would wait on that though until this actually becomes more significant than this momentary downtrend start.

    • will
      Feb 9, 2018 at 1:58 am

      Yea, the shit of the situation is that I don’t think you’ll feel great either watching everyone else get burned. I mean, the world still sucks..

      So, it’s hard to say that “I told you so” is ever going to be a great thing to say, I mean – isn’t losing your shirt enough without some jerk rubbing it in your face? Besides, your boss will likely remember that he (she?) told you to do something foolish after the dust settles..

      If he loses everything and it turns into a real rout my recommendation is to be a decent person and buy him lunch – it’s more than anyone else is going to do for him..

    • fajensen
      Feb 9, 2018 at 2:55 am

      When contracting with demons it is important to know that nothing of any value is ever offered to mortals by The Gulfs :)

      Back in August, my pension fund manager proposed that I should reallocate my boring 50/50 bond/stock split to a more assertive 25/75 split – I decided that it didn’t feel quite right in my tummy and I would wait a while.

      Then I fretted about it ever since, until now. Now I know that I will do it, only question is when.

    • Paulo
      Feb 9, 2018 at 8:30 am

      Good for you, Insta. Maybe there is smarter money but at least you still have yours. Investing should not be done with herd mentality as the driving force, and since it is mostly done by computer algos anyway, with insiders using dark pools to bet against others and using shorter data lines for their own investment ‘edge’, perhaps there are better ways to plan for one’s retirement and financial well-being.

      Of course I write this as one who doesn’t gamble, and stare incredulously at my friends who return from Vegas saying, “We came out even”. Yeah, that’s why Vegas exists, for chumps to break even. Just like the market, for every player to make money!!! Pssst, there is a great new……..

    • Setarcos
      Feb 9, 2018 at 10:10 am

      You might consider FOBB – fear of a better boss. Not so sure about a boss who deems it wise to give you investment advice. #investment harassment?

  10. common sense
    Feb 8, 2018 at 10:21 pm

    I am so tired of the endless selling aka BS by financial types with the exception of Wolf and a few others….

    Whoever rushes in now, will be slowly slaughtered and anyone who has lived through a couple of bear markets KNOWS the long term damage to their portfolios…

    I started shorting the market a while back, was way down and now close to even…guess who calls me today after years of taking commissions stating my funds are “too risky” and he “doesn’t want to be associated” with the choices I made….

    What a scam. And these people are proud to call themselves human beings? No concern for clients, only to cover their butts in times of volatility, yet are happy to take the credit and your % when things are rosy…..make that almighty buck anyway possible.

    Just buy and hold, stay in and let me get my pound of flesh…..

    Death to the money changers and 90% of unethical financial reps.

    • Tom T
      Feb 10, 2018 at 4:20 pm

      Have a red hot insider tip for you … an IPO … small well organized firm out of South Philly called Blockchain Broker Drive By …

  11. Sporkfed
    Feb 8, 2018 at 10:34 pm

    Can you imagine the carnage if money market rates hit 4% ?

    • keepcalmeverythingisfine
      Feb 8, 2018 at 11:10 pm

      Wolf described the market topping process. This usually plays out over several months, not weeks. The big bear market that takes the indexes down 50% or more is likely a few months away. Higher credit spreads, trend changes in labor markets, big name liquidations/defaults, these are the tell tale signs of a full on bear market and economic recession. We are not there yet. This is a correction and it feels more violent and worse than usual, but it is not much different. The massive central bank liquidity injections have built up unprecedented credit risk, so we naturally get more fearful during corrections this time around. Likewise, when the bear market begins in earnest, the fear level will be unprecedented.

      • Frederick
        Feb 8, 2018 at 11:21 pm

        You mean like Sears Shouldn’t have to wait much longer I spect

      • van_down_by_river
        Feb 8, 2018 at 11:47 pm

        I’m curious, why do you feel this is a garden variety correction? You may be correct, needless to say it would astonish me – but I’ve been astonished for well over a year.

        I think this is the beginning of something big. I suspect the flood of easy money allowed a lot of rot to grow on corporate balance sheets – I think GE was a canary in the coal mine. I expect a lot of restatements of earnings and things could start to snowball. The excesses have been more then we have ever seen so it would not surprise me if the consequences are epic.

    • Geoff Fulks
      Feb 10, 2018 at 1:01 am

      I’ve been in the same situation. starting to make some money shorting!

  12. Local
    Feb 8, 2018 at 11:04 pm

    “Whoever rushes in now, will be slowly slaughtered and anyone who has lived through a couple of bear markets KNOWS the long term damage to their portfolios”

    Speed of reset is different this time. The market is organized to make its participants money. And in today’s computerized world things move fast.

    In a few days the S&P should be down by the “Magic -18%” Wolf showed on the above chart. It won’t go below that because the market has been set up so it can’t. If you’re smart you’ll buy as much stock you can.

  13. JB
    Feb 8, 2018 at 11:22 pm

    Well i haven’t heard the Cramer rant ” they know nothing , they know nothing” expounded during the last crash in an effort to get the feds to provide liquidity. To wit:

    https://www.youtube.com/watch?v=rOVXh4xM-Ww

    Dudley’s comments per cnbc article reflect your observations. “small potatoes” .

    https://www.cnbc.com/2018/02/08/dudley-market-drop-is-small-potatoes-economy-still-strong-rates-going-up.html

    • Frederick
      Feb 9, 2018 at 12:46 am

      Ahhh yes Jimbo Cramer Isn’t he the guy who was screaming to buy buy buy Bear Stearns Just before they went belly up? Yup I thought so Carnival Barker presstitute for sure He’s amusing in an obnoxious sort of way I suppose

  14. Feb 8, 2018 at 11:34 pm

    Item of interest the government shutdown drama convenes tomorrow and they always fund government spending. Item of interest Jim Rickards interviewed Bernanke when asked DIRECTLY he said the FED would defend the market at at 15% decline. We’re close. Item of interest this selloff ain’t going away no matter how much the PPT, or coordinated central bank buying is able to rally this market.

    • Cashboy
      Feb 8, 2018 at 11:57 pm

      It wouldn’t stop the SNB (Swiss National Bank) printing some more money and go on a buying spree.
      When the money is free it doesn’t matter what you use it for does it?

      • Feb 9, 2018 at 11:05 am

        When the SNB is printing money and SHORTING stocks then I will be attune to your argument.

    • Tom
      Feb 9, 2018 at 9:08 am

      To paraphrase Albert: Two things are infinite :The universe and Gov stupidity:Not sure about the universe.

  15. Cashboy
    Feb 8, 2018 at 11:54 pm

    What amazes me is that cryptos are crashing, shares are crashing and yet gold is falling when I thought it would be rising.
    That makes me think that there is no actual real money to buy any real physical gold.

    • Frederick
      Feb 9, 2018 at 12:49 am

      But I thought the gold price was manipulated by using paper gold contracts so why would actual
      gold purchases have any bearing on the official price ?

    • Paulo
      Feb 9, 2018 at 8:34 am

      My Gold owning neighbour informs me it drops (when we think it should obviously rise) due to people selling in order to cover shorts they need to get rid of pronto. He has a lot of gold.

      • Frederick
        Feb 9, 2018 at 9:04 am

        Better be careful revealing there’s a neighboring gold hoard near you Paulo It could attract undesirables in the event of some sort of economic armmageddon lol

        • Coaster Noster
          Feb 10, 2018 at 12:53 pm

          I agree. In any instance of complete economic chaos, who would reveal that they had gold? How would they use the gold? Are there $10 gold coins? How do you buy food, with gold? Is it $10 for food, and $100 insurance, so I don’t reveal your name and place to nefarious types?**

          No one with a hoard of gold has ever gone, point by point, day by day through a calendar, explaining to me how their gold, or their guns, would protect them. Always looks good in the first hour, but hundreds of hours later, a month later???

          ** $100 insurance expires in three days.

  16. KPL
    Feb 8, 2018 at 11:57 pm

    “If you start to believe that the long end of the curve is going to start to go up, it makes sense that equities would have an adjustment,” Harker says while answering questions from reporters after a speech in New York.

    And then New York Fed’s Bill Dudley ventured on to Bloomberg TV to calm the masses, proclaiming that this drop is “small potatoes” and the decline in equity values (has no economic implications.”

    (https://www.zerohedge.com/news/2018-02-08/fed-shrugs-10-tumble-stocks-its-small-potatoes)

    This is what probably did the stocks in during the last hour… it looked like the Fed was not going to come riding in with its PPT in tow!

    What does it say about the market? It will not take too long for the markets to unravel without the central banksters’ put. And I do not mean only the Fed. If this is the state of the market now with only the Fed acting and that too gingerly, can you imagine what happens if the other central banksters – ECB, BOJ, PBOC and BOE get into the act.

    The central banksters have got themselves into a pretty pickle, looks like! But then not to worry, after all they are ATLAS, they can swing it their way when they want to. But then what happens one fine day when they find they can’t!

  17. Memento mori
    Feb 8, 2018 at 11:58 pm

    Wake me up if dow hits 10k. I will put my old dow 10k hat on. Not that I care.
    Stock markets are a giant casino that insiders use to scam the common man, no more no less.
    Because of the money involved, they control the media, so everything is about the stock market, the news, the propaganda, the politicians.
    Will we care if the stock market did not exist? Absolutely not.
    Life will go on and TVs and newspaper will talk about more interesting things.
    Its not the economy and all it does in agregate is misallocate other people’s money while a bunch of financiers skim commissons.
    That FED is allowed to print money to bail out such speculators should be a federal crime.
    Why should my savings be devalued at the whims of a bunch of senile academics so some financiers can profit from it?
    I didnt vote for such taxation. End the FED.

    • Frederick
      Feb 9, 2018 at 12:51 am

      Sounds about right It’s a beautiful morning I think I’ll go out on the boat and do alittle fishing Without a phone

      • Tom T
        Feb 9, 2018 at 10:43 am

        Ribovich? Buddy Davis? or Golden Egg?

  18. Bet
    Feb 8, 2018 at 11:59 pm

    So far the indexes are hitting the monthly 10ema ( moving average). This is nothing
    So far ….The markets have been abnormal for so long I am expecting it to be abnormal on the way down. I have traded for myself for over 15 years. I know how to short and have been waiting for a long time for this pullback. I am rolling in the dough ? No , the crazy straight up moonshot had me being very cautious trying the short side too heavily
    Most shorts have missed this drop and most are now too afraid to short now for fear of a face ripping rally. Bulls lose so do shorts. Minxy mr. market hates too many winners on either side
    Me? I take my single hits for now. The home runs will come later. This is just the shot over the bow

  19. Harvey Cotton
    Feb 9, 2018 at 1:12 am

    I don’t understand the snark towards dip buying. What is the difference between “dip buying” and Warren Buffett’s advice of being greedy when everyone else is fearful and enhancing your position in companies you genuinely believe in? You don’t actually lose any money unless you sell below your purchase price, and if you have a dividend reinvestment program you can get yet more shares at a better value.

    • Feb 9, 2018 at 8:16 am

      There is no snark toward dip-buying. Dip buying is the force that keeps the market from plunging in one fell swoop. In a strong market, dip buyers rule (higher lows, higher highs). But you can see when the market sours, as waves of dip buyers get crushed (lower highs, lower lows). And when dip buyers stop stepping into the market, that’s when the market gets in real trouble. So this is important – and not snark.

      • BTilles
        Feb 9, 2018 at 8:52 am

        Hi Wolf,

        To me the problem with BTD strategies is that they tend to assume rather lengthy holding periods which could certainly include further painful drawdowns. Those intrepid dip-buyers of say late 1929 for example “only” had to wait until 1954 to be made “whole”.

        • Wendy
          Feb 11, 2018 at 7:26 am

          I see this example shown all the time, but it is misleading. If you dollar cost averaged through the trough in the years after 1929, including reinvesting of dividends, you would have been made whole a lot sooner than 1954. If you had a balanced portfolio, and rebalanced once per year, you still would have recovered before 1954. Yes, going all in at the peak can require years to be made whole, but this is a silly argument, since if you were dumb enough to invest all your money in the market in 1929, you were also “smart” enough to cash out at the bottom, and never invest in the market again.

      • High game
        Feb 9, 2018 at 3:13 pm

        “What would the Fed to?”

        Spelling mistake.

        “What would the Fed do?”

        • Feb 9, 2018 at 4:08 pm

          Thanks. That wasn’t even a fun typo.

  20. ML
    Feb 9, 2018 at 1:42 am

    The only difference between this and my contribution on another thread is correction of a fruity spelling mistake.

    The load of pretentious nonsense that is spouted whenever the market goes up or down is a lesson in just how needy people are to find a plausible reason to excuse the fact that making money is the raison d’etre for the stock market. 
Mostly people are geared to thinking rising markets: upwards and onwards But investment is not about a one way direction but about becoming better off than now. With ways of making money out of downwards and inwards, it is manifestly unrealistic to disregard the potential in those methods. The bottom line is that amongst those that are better able to capitalise on falling markets the desire to provoke the market into crashing is ever present.

    • HTL
      Feb 9, 2018 at 5:03 am

      My vote ;;;; crash the markets once per week.

  21. GSX
    Feb 9, 2018 at 3:52 am

    The peak mentality is in play. Housing etc. Time to pull back and assess. Buying opportunities are there but this coupled with CentBank interest in higher rates means the cheap money is dead and reckoning is on the way abeit slowly. There is more to this than a rest stop on the Autobahn of investing. A recession is hardly out of the question. Its mitigation is the issue as a potential.

  22. Rose
    Feb 9, 2018 at 5:28 am

    “Nothing in politics ever happens by accident. If it happens, you can bet it was planned that way.”

    Franklin D Roosevelt.

  23. keepcalmeverythingisfine
    Feb 9, 2018 at 8:11 am

    ” van_down_by_river
    Feb 8, 2018 at 11:47 pm

    I’m curious, why do you feel this is a garden variety correction? You may be correct, needless to say it would astonish me – but I’ve been astonished for well over a year.

    I think this is the beginning of something big.”

    This is indeed the start of something big, but it just the start. Go back and view previous bull market tops, and you’ll see a process that unfolds (correction, liquidity drain, tepid recovery, labor market trend change, HY credit spreads widening, second correction, defaults, more layoffs, and onward over months). The crash of 1987 was the exception to this topping process. Typically bull market tops are the realm of veteran traders with ice water running in their veins. The best the average investor can do would be to lighten up on exposure to stocks and bonds, selling into any strength. This is extremely hard to do at the top, as is buying at the bottom when all hell has broken loose and it looks like the world is going to end. The last time we had what looked like a bull market topping process was just before the election. Central bankers were still pumping massive liquidity and it reversed. This time around that liquidity pump is being turned off. Will they turn it back on? We don’t know when. All we can do is trade the reality of today. We all wish we were swimming among just regular sharks without the giant killer whale central bankers in there with us. Unfortunately this is our reality and we have to deal with it. I’m selling into strength here. It is hard, I know.

    • JZ
      Feb 9, 2018 at 11:24 am

      Don’t trade if you are NOT a trader.
      For me, I am NOT. So I don’t. I buy values. The ZIRP makes all asset return become close to ZERO, so I see NO value while traders call this TINA, there is NO alternative. I understand them. They have to make money trading on yearly basis, so if nothing is up or down, they will lose their job. Let them compete in this ZERO value game which is inherently a wealth transfer game. I will buy when I see value and the S&P has to fall at least half before I see it.
      I can do all of this because Inhabe an edge over traders. I have a W2 day job.

  24. Bead
    Feb 9, 2018 at 8:57 am

    This looks like a rinse job to me, running the stops. Plebe panic ensues. Then there are the hedge fund vol shorts. I attempted a Brexit vol bet and was handed my hat by the Fed finks (it was a dumb idea). I got most of it back a earlier in the week. I don’t think the Wall Street wise guys wish to share their tax cut bonanza with the unwashed. And it appears nobody is mourning the vol shorts, just waiting for them to be sold out.

  25. Alistair McLaughlin
    Feb 9, 2018 at 9:05 am

    Apparently, the Fed’s reluctance to weigh in with soothing words and promises of action is “ominous”:

    https://www.cbsnews.com/news/fed-chair-jerome-powell-silent-on-market-chaos/

    The author concludes with this:

    …Powell may have no choice but to bolster confidence.

    “Crybaby” doesn’t even come close to describing it. That the Fed will rescue the market from itself has moved beyond the status of unquestioned assumption. It is now an entitlement. A generation of market participants – from Wall Street titans to retail investors – considers Fed intervention on their behalf a birthright.

    Kind of like housing market participants in Canada. “The government won’t let housing fall”, or even better – “the government can’t let housing fall” – has graduated from national myth to accepted statement of fact. Slowly, the folks in the GTA are starting to find out otherwise. (Rest of the country to follow.)

    • Prairies
      Feb 9, 2018 at 11:27 am

      Rest of the country to follow? The rest of the country has been in some form of recession for the last 3 years or longer. Some places were kicked into a recession when the oil crashed, some were due to the weak dollar.
      GTA and Vancouver are just starting to feel the effects now that the housing market that fueled their growth is being hit with the smallest of interest rate increases. Imagine the outcry if we had interest rates of the 1980s. Some double digit interest rates would curb stomp some speculators in a heart beat.

  26. Paul Morphy
    Feb 9, 2018 at 9:27 am

    “Dip-buyers that didn’t get out of the way quickly got crushed each time. There will be wave after wave of dip-buyers, but if they keep getting crushed, they will wait longer and longer before they jump in, and they will have shorter and shorter time horizons, jumping out more quickly and more nervously. If this goes on long enough, and dip-buyers lose interest, that’s when the market gets in real trouble. But it will take many more waves of crushed dip buyers before it gets there.”

    Very well put, Wolf.

    I come from a time when shares were bought so that the buyer would earn a dividend from the company, and perhaps enjoy too some capital appreciation for the share that was bought.

    These days, equities appears to more about “get rich quick merchants”

    I’ve no sympathy for carpetbaggers.

  27. Prairies
    Feb 9, 2018 at 9:42 am

    With the chart in he article it looks like a simple pattern under the current regulations. The dip is only 10%, wait until 18-20% and see if it bounces like the last 2 dips.

    If it drops below 2400 it will likely snowball into a freefall. Based on the news of more government shut downs being threatened it is a good chance it drops to the 20% loss mark. The question left is will it bounce, or fall.

    • Smingles
      Feb 9, 2018 at 12:31 pm

      “With the chart in he article it looks like a simple pattern under the current regulations. The dip is only 10%, wait until 18-20% and see if it bounces like the last 2 dips.”

      It will almost certainly bounce. The important question is whether it’s a dead cat bounce (my favorite trading term), aka bull trap.

  28. Arnold Ziffel
    Feb 9, 2018 at 9:59 am

    Ignore the rising 10 year T-bill rate. Stocks to the moon Alice!

    • Frederick
      Feb 9, 2018 at 10:33 am

      I wouldn’t get too excited This market is so volatile that it could be down 500 points by the close

  29. michael Engel
    Feb 9, 2018 at 10:56 am

    DOW to 25,600, but u will never forget what will come after.

  30. gorbachov
    Feb 9, 2018 at 3:03 pm

    It looks to me the market will test the new lows often this year. The

    new tax rates are baked in and won’t provide a lift.The earnings

    will have to justify the elevated P.E’s to get any gains. To give you

    an Idea of how I’m thniking, GE goes to 8 and F to 9.

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