The market broke through the level of resistance hit this past Friday. This is unsettling from a technical perspective because the path of least resistance is set for lower lows in the short-term. Will this occur? Time will tell. The tend is currently set to continue lower.
I actually wasn’t too surprised by Friday’s move lower. If you recall the week leading up until Thursday saw some very bullish moves. Friday’s downward swing took out those positive movement from earlier in the week. Today’s negative trend puts the market in more unsecured waters. I read this as a confirmation that their is greater concern in the near-term and that market sellers are gaining the upper hand.
On a final note, I think times like this are great lessons for investors. Right now you might be asking yourself, “What should I do to protect my investments?” Buy, sell or hold? Where do I turn? This is sort of like being in a hurricane and asking how to save your house. Once you’re in the storm it’s much more difficult to react than prior to being in the storm. How can this be avoided?
In short, you either set stop orders to help you get out of positions based on certain rules, be proactive in terms of setting target prices (whether it be for ETFs, individual stocks or other funds) or develop hedges within your portfolio to counter negative price movements (short positions).
Again, your success of protecting your property isn’t while a storm is going on, it’s prior to the storm hitting.