I have been holding about 1/3 cash in my SEP IRA waiting for the S&P 500 to sink back to the 20 month simple moving average. This is something it does most summers and usually represents the perfect buying opportunity. Today however is a scary day to be buying stocks because it feels like the “Sky Is Falling” and my best stocks are getting crushed. The S&P 500 is down 37 points, the Nasdaq is down over 60…. crude oil is down over $2…. even gold and silver have plunged after their earlier gains. It seems the investment world has finally lost it’s appetite for risky assets. The gains I had seen in my portfolio over the past few weeks have almost been wiped out with the majority being lost in the last 3 hours. This is why it’s so hard to be a contrarian investor. I am forcing myself to buy stock, but I would really rather be 100% in cash for the moment. I just added to my position in the leveraged oil ETF (ERX) and bought 100 shares of XIV which is the inverse volatility ETF that performs like a champ as the market recovers. The next move I am contemplating on is to purchase the Leveraged Biotech ETF that I bailed on $20 higher from here just 8 days ago. BIB however, really does feel like trying to catch a falling knife so I think I will start with a rather small position.

In reality I really don’t feel like buying anything today. When you lose thousands of dollars of profit in the blink of an eye it tends to make you gun shy, but this is where the big money is made. The large investors have been waiting for a chance to buy near the 20 month moving average. Sensing panic this morning they fueled the decline which is leading to a classic capitulation day. Today is most likely the low in most of these stocks but the odds are good that there will be another test of these lows prior to the fall rally. That’s why I will deploy part of my capital today and wait to deploy the rest either on a successful retest of the lows or when the charts actually turn up. After all, I want to be a contrarian investor, not a wild west gun slinger! By deploying your capital in a planned manner you tend to make much wiser decisions than if you fly by the seat of your pants.

Good Luck To Us All!