There are two possibilities for the current market. The first is that we have bottomed or that we put in a bottom in the next couple of days and then have a typical 10 day rally that lasts into option expiration. Of course that does not mean it would be straight up. The second is that we are in the midst of a "selling stampede". Jeff Saut of Raymond James has coined the term "selling stampede". According to Jeff Saut:
such stampedes tend to last 17 to 25 sessions, with only one- to three-session counter-trend rallies, before they exhaust themselves on the downside
So which is it? The recent decline has been unlike anything I have seen. The market has fallen top to bottom 12% in less than nine days. There have been some bad economic reports but no crisis that is responsible for the decline and debt markets are pretty calm all things considered. The market was short term overbought when the decline started but sentiment was not stretched by any measure and we were oversold in the intermediate term. Despite that the move has been straight down without even a bounce until yesterday.
Given that the current decline is different from anything I can recall, I don't have a strong opinion on whether this is a selling stampede or not. If we do get a bounce I might just jettison the balance of my longs and play it on the safe side.
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