Irving Kahn, a legendary investor, and student and later coworker of Benjamin Graham, once said about speculators and investors in Wall Street:
“… I thought the people were crazy … They were running around and screaming at each other during trading hours, and they were like clowns!” He considered these people evil, destroying the market. I must admit, at some point I agree with Mr. Kahn, that speculators at Wall Street are clowns (well except myself and many of my dividend invostor blog friends – but they are not speculators). I also think that many of them do not know what they are doing. Many of them are just trained monkeys to sell stocks to public no matter what the stock is worth. Mr. Kahn died at the end of February at 109.

So what the clowns were doing today at the market? Freaking again. Everything they were buying yesterday they started selling again today. And I bet, they were running around and screaming at each other acting like clowns.

The price action of the S&P 500 has changed the picture however. Long term, we are still bullish on the market but short term, we are in trouble and heading down. There is a saying that markets take stairs up, but elevator down. It looks like, we just entered that elevator.

Today, markets sold off again blasting through all supports and statistical levels on increased volatility. So tomorrow we will probably see another technical bounce up and then later a renewed sell off. Here is my expectation for tomorrow:

We have last support to hold the market. That support will most likely be broken, the question is when. I think, tomorrow it may hold and bounce the market back up to 2065 – 2070 level. Then we will see another trend down to 2010 or possibly even lower to 1990.

And what is the trading range for tomorrow?

We reversed our bull put spread into a bear call spread today. With one more volatile day like today, our trade will be fully profitable. The goal here is to stay patient, do not panic, have your head always clear and know what to do when the trade goes against you.

You do not have to be right all the time, but you have to know what to do when you are wrong. And the best thing is to make money, even when you are wrong.

Let me finish with two Mr. Khan’s quotes I liked:

“The analyst must both practice, and to his client preach, patience.”

“If you command a lot of cash, you can be wrong and still not have to worry.”

Happy trading and let’s hope, tomorrow will show us we are on the right side of the trend.