Thursday, August 4, 2011 2:22 PM – Panic Selling Appearing

As I wrote this morning, the big thing driving the market down has been European selling to raise cash. Today, we started to see signs of panic selling as they are selling even the winners like gold. That is usually the last step in declining a market, though it can be a big step. The market is down -3%+ for the day and -9.3% in the last 11 days.

Despite what people are saying about the economy and they will say much more when the unemployment rate gets announced tomorrow AM the big issue is European selling in order to raise cash. Enough selling is going on to likely have been generating margin calls which force more selling.

I don’t see this as another 2008 for a variety of reasons (perhaps more on that later) but I still have our 15% stop loss rule just in case.
Some smaller, more aggressive positions are getting close to that. Most of our stock holdings have dropped less than the market the last ten days and our bond positions are up, not down. Our gold is also up.

If gold comes down 5-10%, I may add a little to our position. I am also watching food and oil. Food commodities (I use DBA) have been in a 10% trading range for 3 months while other commodities have been dropping sharply. Oil would need to decline perhaps another 10% to be attractive.

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