Market Gloom Thickens in a Sea of Uncertainty — Here's My Best Advice

Market Selloff, Traders

The market action on Thursday was among the worst we have seen since the market started struggling about a month ago. There have been bigger single-day losses than the 1.5% drop in the S&P 500 and the 2.1% shellacking of the Russell 2000, but the poor breadth, steady selling, and deteriorating sentiment created a massive negative feedback loop that felt different from the sharp down days earlier in this stretch.

The action had the feel of something I have often written about: bad markets don't scare you out, they wear you out. Investors are growing very tired of this action and are dumping stocks out of disgust rather than fear. That is a subtle but important distinction. Fear can reverse quickly. Exhaustion takes longer to work through.

There is no mystery about what is driving this. No one knows what will happen with Iran or oil. It could end suddenly within days or drag out for months. This is investors hating uncertainty in its purest form.

What was particularly troubling about Thursday's news flow was comments from President Trump indicating there is no plan to leave Iran until the job is finished. There is no definition of what that means and no time frame attached to it. There are also constant reports of Iran's determination to continue the fight, which may be mere bravado but contribute to the difficulty of predicting any eventual resolution.

I am going to sound like a broken record about how to navigate this but there is genuinely no alternative. It is foolish to try to predict a market bottom here. All we can do is sit and wait for something to change.

It is often much easier to navigate a market hit by a clear negative event. The news gets priced in and investors can focus on what comes next. In the current situation that is not possible. Investors cannot price in the impact of Iran or oil because there is still no way to know how bad it will get or how long it will last. That is the specific nature of the uncertainty that is so difficult to deal with.

My best advice is to stay positive. Not positive that the market is going straight back up. Stay positive about the opportunities that are developing in this miserable action. Some very good stocks are being mispriced right now and eventually we will be able to buy them and catch meaningful uptrends. That is what patient preparation is for.

Have a good evening. I'll see you Friday.

At the time of publication, Rev Shark had no positions in any securities mentioned.