It’s official. It’s Black and it’s Tuesday.
I was in meetings today and missed the main action. I have now been out of the office on all the big Black days. I was wearing a black golf shirt though.
My trend following friends at Blackstar just sent me this nugget:
Today was the 3rd largest one day down move with the data we have (1983 to date)
#1 87′ “black Monday”
#2 October 19, 1989
#3 Today, “black Tuesday”
It does not help to be emotional. Trend following is price driven in the end. The overall market is driven by mood, confidence and psychology. Earnings and cash flow don’t mean squat if their is no confidence. Chipotle’s is cheap at $60 when people have confidence in the overall market and could be overvalued at $30 tomorrow. Days like today remind you that prices, like objects, fall faster than they go up.
It is why money management, including margin control and leverage are the MOST important aspcts of any strategy. If you don’t have a money management strategy you are a deer in the headlights after moves like today. They happen. Based on the data I am seeing, not often.