'Tis the Season for Overreactions

The futures last night painted a very ugly picture in the commodity arena, with the equity futures lagging as well. Suddenly gold and crude are green and silver -- wow, silver is up 2% after being down 4% overnight. I know several traders who prefer to play the futures and to fade any big moves on Sunday nights in hopes of seeing this type of reversal on Monday morning. That isn't my type of game, but neither is overreacting to a Sunday night futures move.

It isn't just Sunday night where we are seeing these swift moves, what some might call overreactions. The action at the close Friday on the Russell 2000 was another astonishing one. In the last 30 minutes alone, the iShares Russell 2000 (IWM) gave up $1, or nearly 1%, on nothing of major note that I could see. Granted, trading was thin into a holiday weekend, but the move was blunt and concerning for many.

Overall, these types of moves are not what you associate with a strong or a bull market, be it commodities, currencies or equities. Even this morning, we witnessed Apple (AAPL) drop $6 in a minute bar. The chart below is pretty telling. That's over $35 billion, with a "B," in market cap in the time it takes to put on some tennis shoes.

Apple (AAPL) Stock Chart

Source: StockCharts.com

View Chart »View in New Window »

I'll admit, it feels a bit creepy out there the past few days. If you are a trader who exits at the end of the day, I would certainly avoid any market on close orders right now. In general, I pack things up with at least five minutes to go, but 15 or 30 minutes is starting to feel a whole lot more warm and fuzzy. The same goes for the open with me. I have no interest in the first 90 minutes right now, let alone the first five or 10 minutes.

I'm not worried about missing a big trend day. If we are going to trend, then I can still do well coming in 60 or 90 minutes into the day and have some defined risk to measure my position. Like I said, I prefer the 90 to the 60. And if we are going to reverse, there's a good chance we'll see hints of it in the first 60 to 90 minutes of the day.

While we tend to measure stuff based on the year, the calendar doesn't stop for many. It's simply a rest stop to take a look at the road you've traveled and to plan for the road ahead. It isn't the end of the line for most.

Unless your job depends upon it, don't try to make up any perceived shortfall for the year simply because 2014 is coming to an end. Let your strategy be your guide and not the calendar.

At the time of publication, Collins had no positions in any of the securities mentioned.