Posted October 29, 2020
By Alan Knuckman
Is the Tech Takeoff Finished?!?
The market has remained resilient in the face of countless threats this month, from surging Covid infections to election uncertainty.
But we finally saw the levee break Wednesday morning. Wave after wave of selling hit the markets, beginning in Europe and then jumping across the pond after US markets opened. After a day of steady selling, the S&P closed lower by more than 3.5%, while the tech-heavy Nasdaq Composite lost more than 3.7%.
The major averages are all down big so far this week, with the poor Dow leading the way lower. It has now dropped nearly 6.5% on the week and is quickly approaching its September lows.
Is this weeks carnage a preview of what we can expect following next weeks contentious election? Or will buyers step in and save the day?
Check out my latest TV appearance to learn where I see stocks and commodities heading into the election:
Keep it In the Money,
Alan KnuckmanEditor, In-The-Money
Chart of the Day: Dont panic, just wait
The markets having trouble finding enthusiastic buyers this week
As Alan mentioned, the Dow Jones Industrial Average is looking especially shaky right now as it teases its September lows
I dont think its time to sell everything and get out of the markets way just yet. But I also dont think it would be wise to begin aggressively picking up shares of any of the harder-hit stocks, either.
Many newer traders get caught in the trap of trying to buy stocks that have recently dropped in hopes of a quick turnaround.
Yes, turnaround plays can be some of the most lucrative trades youll ever see. But you wont hit a winner if youre only buying because the stock is down big.
Remember, downtrends can last a long timelonger than most investors expect. Snatching up shares of an ailing stock just because its cheap or has taken a beating recently is a surefire way to get in hot water.
When youre looking for turnaround plays, make sure the chart is showing signs of life. Sure, you might miss the first leg of a comeback move. But you wont lose a chunk of change by taking a chance with a stock thats in free-fall
-- Greg Guenthner