The big selloff yesterday, as broad and deep as it was, coming on huge volume, wasn’t unexpected.
Historically, some of the markets’ biggest drops have come on Mondays.
Typically, the previous week’s selling, whatever triggers it, crescendos on Friday afternoon before markets close for the weekend.
As scared investors worry that more bad news over the weekend will tank stocks on Monday, they sell futures, which draws attention to Monday’s expected weak opening – making a Monday selloff almost self-fulfilling.
Coronavirus fears triggered all that last week with investors shedding stocks going into the weekend and selling futures right up to the open. That’s why Monday’s big selloff wasn’t unexpected.
But it wasn’t panic selling. For the most part, selling Monday was orderly.
The worst news of the day was benchmark indexes couldn’t bounce and ended near intraday lows.
What’s happening right before our eyes is investor psychology turning negative.
The question investors should be asking now is, will more negative news and fear trigger panic selling?
It could and probably will.
Here’s what’s changed, what could trigger panic selling, how to see it coming and what to do about it