As the table of SPX pullbacks below illustrates, the current selloff is the second sharpest in terms of magnitude since the bull market began in March 2009. It is now the longest in terms of duration, spanning 66 trading days since the high of SPX 1370.
Those who want to initiate new long positions in this environment may wish to limit risk by using options (long calls, bull call spreads, bull put spreads, etc.), but the time has come for the contrarian in the asbestos suit to start at least nibbling on the long side. Those with a more cautious demeanor may prefer to wait for some better evidence of a technical bottom and perhaps even a confirmation of that bottom, but while buying at current prices may risk being a little early, there is also a good chance that today’s sale prices will not be around for long.
[On a personal note, this blog has been quiet for a while as family matters, a vacation and three new computers have competed for my attention. With volatility back on the front page, I will be posting again on a daily basis (at least) in order to offer my perspective on the current spike in volatility, some of its causes and the implications for trading.]