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S&P 500's Large Gap Down Doesn't Have to Be So Painful

Stocks in this article: SPY

"The main purpose of the stock market is to make fools of as many men as possible." -- Bernard Baruch

NEW YORK (TheStreet) -- A large gap lower across the board is never fun to see -- unless you're short. I was not short, but I did exit all positions and moved to cash Tuesday, so I'm just enjoying the show for now.

We saw several stocks come back to fill the gap but then fade.

I'm not so sure it's yet time to try dip buys, but with earnings really ramping up next week, we should get some good buy points.

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After a few more days to let this recent weakness play out, we could be back into stocks in a big way.

The SPDR S&P 500 ETF (SPY) hard a large gap lower today.  Thankfully we were out a few days ago. I don't like the action, so I'll sit in cash until I see a sign of a low.

So far, the S&P 500 ETF has been holding the 21-day average. That's good, but we could easily move to $194 and possibly $192 before we begin to move higher once again.

There is nothing wrong with a good washout as long as you aren't holding through it.

Enjoy your wonderful summer evening.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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