Equities taking a break

U.S. equities continued their fall that began with last week's tough Friday.  Today's follow up was more of the same, with names in many formerly strong sectors slumping and names that have just individually excelled in any area over the last year taking it on the chin.  Raising the same question that was raised here a week or two ago, is this a rush to liquidity after a sustained run up, is it reflecting new valuation parameters that are more conservative or some might say more rational, or is it primarily a dousing of the fires that have been leading many tech and biotech companies to blast off into the stratosphere.

Investors are surely mulling this over tonight.  When do we jump in and bottom fish?  When is it time to put what has been idle money to work, taking advantage of a retreat to get into the market?  Or the question that no one wants to face, when do we sell, take gains, and wait for a better day?

Broadly speaking one could see experienced investors being copacetic at this point, having a "we've seen this before perspective".  The action required is to stay put and look for opportunities while lightening positions that were maintained for their momentum or cachet but whose valuations are questionable.  It is not a dire situation at all and may be a healthy one, allowing the market to catch its breath and setting the stage for investors on the sidelines to come in and give the market more breadth.  To those investors who can sleep well while maintaining their composure, more power to them.  This turn is only two days long, admittedly long days.

Most investors want to feel this way, meaning stay in and be opportunistic.  The overriding fear is one of the bottom dropping out of the market.  That's a rapid untradable decline.  This possibility, however remote, haunts many investors, especially those without a steady flow of liquidity or with a short time horizon for investment returns.

At the moment this does not look like a market that will shoot back up again in the near term.  Something more fundamental seems to be going on.  Is it a meaningful across the board valuation adjustment, or is there a bigger unknown on the horizon.  Given geopolitical events and important country specific challenges, take your pick, there could be a perspective creeping into the market that is not so optimistic.

Stepping back, there has been no recent change of economic data that would have been a harbinger for this decline. This has been a market driven, not news driven, two day decline. Tomorrow brings more information.