Welcome to the Jack Rabbit Market

Since January’s breathtaking whoosh down, investors have been frantically hopping from one market sector to the next with little gains to be had, overall.

The market’s flat performance to date disguises the turbulence below. As of early this week the S&P 500 is up a bit more than 2%. The Dow Jones, the NASDAQ and the Russell 2000 are all up between 2% and 3.5%—a pretty narrow range of performance.

But underneath the surface there has been huge sector volatility. The Biotech index (IBB), traditionally a more volatile index, has had four double digit swings since January. Its steepest decline of 25% in January was followed by movements up and down of 17% and 13%.

The Retail Index (RTH), the Semiconductor Index (SOX), the Oil Service Index (OSX) and the KBW Bank Index (BKX) have been jumping like water drops on a hot skillet. Sweat inducing 20% drops are often followed by a 10% to 15% rush up.

We’d be happy for a simple bunny rabbit market: you know, small hops here and there with plenty of idle time munching on grass. But this is a Jack Rabbit market. If you’ve never seen one, know they launch high before dropping back to earth.  And a Jack Rabbit uses its gigantic ears to hear the most subtle noises and then springs away in a flash—much as investors in today’s market have gotten jumpy over disquieting news.

Oil’s plunge, Europe’s anemic growth and China’s rapid slowdown have put investors on edge. One whiff of good news sends them piling into a sector, but they bail as soon as a cloud shows up on the horizon.

We’d advise investors to sit tight and average into stocks they like. Unless you’re a day trader with fingers poised over your trading screen, there’s little to be gained from jumping from one investment to the next. Know your stocks well and when that inevitable downdraft hits, pick up a few more shares. Set a target in advance and start to sell some shares as you hit that price.

And when the Jack Rabbit collapses from exhaustion, you’ll be sitting pretty with a well-priced portfolio.

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