Stock Market Keeps Crashing. Don't Jump the Gun until Reversal is Confirmed

The global stock market has been plummeting for several weeks now. Today STI fell a whopping 7.35%., an epic one-day fall we have not seen for years, Even for my system's MATA analysis, the percentage has fallen to an extremely low value of 10% which means it is deep in the oversold region.  Despite that, a reversal uptrend is nowhere to be seen as yet.



What I've learn in this market crash is that market can go much lower than you can ever imagined. We humans tend to be influenced by recency bias. "Recency bias" is the phenomenon of a person most easily remembering something that has happened recently, compared to remembering something that may have occurred a while back. We still crave for the recent bull market reversal that seems to happen in every downturn and believe that it will happen again this time. Well so far, Mr Market has proven us wrong (and Mr Market is always right). Even I was tempted to enter a position as the market looked cheap.

I can only say that I am glad I kept following my trading strategy systematically. I sell when the system hits the stop loss and protected my capital from the ensuing crash, System is unbiased and emotionless as oppose to we humans who are driven by greed and fear. So far I am sitting on 100% cash for my portfolios. I will wait for the system to issue a trend reversal before entering. Many may not agree with the way I do things, but you cannot deny the fact that the system managed to protect my capital during this market rout. While even the supposedly stable stock market indexes that are made up of blue chips have drawdowns of more than 30%, my strategy that supposedly trades smaller caps stocks probably only fall close to 10% YTD (stay tune for my monthly report end of the month for the exact figures). Now I know why the strategy beta (Beta is a measure of a stock's volatility in relation to the overall market.) is only 0.5 that of the benchmark.

Ok, so what I want to say is, do not jump the gun. Market may look cheap, but it may get cheaper. Until a bullish reversal is confirmed, please refrain from jumping all in, lest you may end up catching falling knives. Of course, most importantly, please do your own due diligence.

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