The US Market Sell-Off In Perspective

For the second straight day the US stock market closed off the lows of the session, but I still do not like the action. The Dow (^DJI) closed lower by 176 points or 2.0% after being down as much as 310 points and in the early afternoon was nearly breakeven. The S&P 500 (^GSPC) gave back another 20 points or 2.2% and the NASDAQ (^IXIC) also tumbled 2.2% or 35 points. The commodities did not sidestep the selling as both gold and oil fell.

THE BOTTOMLINE: The action the last two days on the tape is not what I would call encouraging. Starting with Monday and the higher open caused by the $580 billion China stimulus package. By late morning the buying had subsided and the market turned negative. The fact we cannot hold a strong open after a weekend for more than a few hours it suggests there is more downside ahead. Today (Tuesday) also saw a mid-day rally that took the indices back to the breakeven line, only to fail in the final two hours of trading. The lack of follow-through on any rally is disappointing and will be the thorn in the side of the bull.

On a more potentially promising note, the indices are now at the lower end of the current trading range and a bounce could be in the cards in the coming days. The Dow will find support in the 7800-8000 area, where it bottomed twice in October. If the index can hold support once again (Dow closed at 8693 today), it will give further evidence that stocks are simply in a holding pattern as the bottoming process continues. A breach of the October lows and it will be time to once again considering hedging your portfolio with short ETFs or other comparable investment vehicles. I will not attempt to make a guess as to the direction of the market if it tests the bottom, but I do believe we are in the second month of the bottoming process and that seasonality is on our side for a year-end rally.

VETERANS DAY PUTS EVERYTHING IN PERSPECTIVE

In times of war and financial uncertainty, Americans tend to overlook the freedom they wake up with every morning and focus more on the gyrations of the stock market. Even though without our freedom there would be no need for a stock market or retirement accounts. On this day to honor our armed forces I would like to have everyone not think about the stock market for the remainder of the evening and focus on the men and women that put their lives on the line on a daily basis for our freedom.

I spent this past weekend on a Navy base in Rhode Island and I have to say I am so proud to be an American after the two days. One of my truly great friends is currently serving in the Navy and to hear the stories and think about the images, it puts things into perspective. Granted, my job is to protect and grow my clients money and I do that on a daily basis. However, when a stock does not go in our direction it is not the end of the world, but a move in the wrong direction for one of our soldiers could be the end of their world. Please thank the military personnel next time you see them.

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