It's Hurricane Season

We had just stepped onto the tee box at the 18th hole a couple of days ago when it started to sprinkle.

Were it January we might have said, “Hey, let’s just finish the round, maybe we get a little wet…”

Not this time of year. The sky was turning. We felt the water. The only responsible thing to do was head for the clubhouse.

Clouds burst open right as we got there. Had we tried to finish the round we would’ve been soaked.

It’s hurricane season in Florida. This time of year, when it rains, it pours.

And it’s volatile. Often you don’t know when the rain is coming. Meteorologists do the best they can. But these storm systems move fast and defy forecasting.

All we can do is seek shelter when we see it coming.

It reminds me a lot of the current market environment. Selling pressure and volatility have really picked up since July.

We’ll talk more about it on Thursday at 11 a.m. ET during the Breakout Multiplier Weekly Strategy Session. If you're not a member, click here to join.

For now, let’s illustrate the point with a chart. This AI-fueled bull market has been all about semiconductors.

Take a look at the VanEck Semiconductor ETF $SMH, which saw another big selloff on Tuesday:

SMH was down 7.5%, the third time in the last month and a half it’s been down more than 6% in a single session.

That’s a big departure from what we’ve grown used to in recent years.

The last time SMH was down this much in a single day was March of 2020. That was another stormy time, with many big pandemic-driven selloffs.

We've had three such days just since July.

In other words, when it rains these days, it's been pouring on the bulls.

Selloffs are severe. Big up days and big down days have become common. Volatility is spiking and crashing in historic fashion. 

Risk is elevated to the downside, just like hurricane season.

So we should be prepared.

For me, that means taking a more conservative approach and reducing my exposure to risk.

I did a good deal of selling in the back half of July as I noticed the character of the market shifting.

I’ll redeploy that dry powder as soon as hurricane season passes. And I’ll let you know when I do.

For now, let’s focus on staying safe and dry.

- Steve