In last weekend’s blog the question remained, “Have we reached a bottom?” Well folks this week might of provided the answer. Despite yesterday’s sell-off,  all of the key indices posted impressive gains on the week. In fact, this week marked the best market performance in the past two months. A welcomed sight for all of the bulls out there. On the week, the Dow Jones Industrial Average (chart) gained 4.32%, the Nasdaq (chart) +5.89%, the S&P 500 (chart) + 4.74% and the Russell 2000 (chart) +6.15%. Notwithstanding these inspiring gains, volatility remains quite high.

So now the question is, was this a technical bounce or is the fear, panic and the concern of a recession still in play? Well if you are reading the daily headlines and are listening to the plethora of pundits, we are not out of the woods yet. However, the markets seemingly liked what Chairman Bernanke had to say at today’s annual economic conference in Jackson Hole, Wyoming. Mr. Bernanke indicated that the Federal Reserve is prepared to provide additional support should the economy really begin to stall, and in the same breath, he indicated that he expects growth to pick up in the second half.

I think for growth to pick up, consumers will have to regain the confidence they had earlier this year, which may not occur unless we get real job growth in this country. For that to take place we are going to need meaningful leadership and less politics out of Washington. Is that possible? I hope that our nation’s leaders are paying close attention to the most recent Presidential and Congressional approval ratings for Americans have had enough. Hopefully this will get them moving in an effective way.

Have a good weekend 🙂

~George

Not since the market crash of 2008/2009 has the market had such a sharp sell-off as we have witnessed over the past month. In addition, over the past month or so there has been mutual fund outflows not seen since March of 2009 (which happened to be the market bottom). This typically means the retail investor is throwing in the towel. Also, not since World War II has the 10 year treasury yield been below 2% in a desperate flight to safety. I can go on and on, but the point I am trying to make is there are a lot of indicators out there which are historical signs of a bottom being put in. However, it’s important to remember that markets that are being driven by emotion, fear and panic can indeed continue to act irrational and trade lower before reversing.

So far for the month of August the Dow (chart) is down approximately 11%, the S&P 500 (chart) -13%, the Nasdaq (chart) -15% and the small cap index Russell 2000 (chart) is down a breathtaking 18%. Now folks if this isn’t fear and panic running rampant, I don’t know what is. That said, it will certainly take a lot of courage and fortitude to step in front of this freight train, but in reviewing some of the historical market metrics that are currently in play, this may be the time to consider dipping your toes in. However, if you choose to enter this type of market environment, one of the golden rules of trading and investing is to scale in very small and build your selected positions over time. Of course anyone considering investing in these markets or any market for that matter, should always first consult with investment professionals.

Have a great weekend 🙂

~George

After a relatively calm week, today markets around the world from Japan to London tumbled. Incessant fear out of Europe was in part the culprit and weak economic data out this morning here in the U.S. has our markets down about 5% at mid-day. Currently, the Dow (chart) is down about 475 points, the S&P (chart) 500 down roughly 57 points and the Nasdaq (chart) is off around 126 points.

Oversold conditions remain, however,volatility appears to be back in full force. Check out the fear index (VIX) (chart) surging 30% today. Be careful when navigating these waters, it appears that we are going to be in this pattern for a while.

~George

For the first time in its 115 year history, the Dow Jones Industrial Average moved more than 400 points for four consecutive trading days this past Monday through Thursday. The volatility that these markets have been experiencing is truly remarkable. With that said and all things considered, the key indices on the week finished modestly lower. For the week the Dow (chart) gave up 1.5%, the Nasdaq (chart) – 1%, the S&P 500 (chart) – 1.7% and the Russell 2000 (chart) on the week finished lower by 2.4%. At certain points this week, these indexes were close to being down 10%. That is how much fear and panic had set in.

Stocks are certainly in a correction phase and some pundits believe that the bottom was reached this past Monday. I am not so brave as to call a bottom here, however, I still believe that the market remains oversold and this 2-day rally we are in just may continue through next week. Personally,  I will need to see a lot less volatility in order to feel confident that some degree of normalcy will come back into the markets. The problem is there doesn’t appear to be a short term catalyst in sight that can alleviate the investor fear that is running rampant right now. I will continue to be patient and allow things to settle down before I feel confident about these markets.

Thank goodness the weekend is here. I think we all need a breather 🙂

~George

Here is how the Dow Jones Industrial Average (chart) has closed over the past five trading sessions; Thursday August 4th, down 512.76, Friday August 5th, up 60.93, Monday August 8th, down 634.76, Tuesday August 9th, up 429.92 and today the Dow (chart) finished down a staggering 519.83 points. These are unprecedented market swings and are incredibly difficult for any investor to endure.

This market is panicked, highly emotional and without question going through additional margin call selling. When you are in this type of market environment,  probably one of the best things to do is absolutely nothing, especially if your stop loss targets have not been hit. The key indices are still in a very oversold state according to the Relative Strength Index (RSI), however, it is important to remember that stocks or indexes can remain oversold or overbought for extended periods of time. Let’s hope cooler heads prevail and some type of market normalcy can come back over the coming days. Good luck to all.

~George

A massive sell-off occurred across the board today in one of the steepest market declines since the 2008 credit crisis. On the day, the Dow (chart) lost 5.5%, the Nasdaq (chart) -6.9%, the S&P 500 (chart) -6.7% and the Russell 2000 (chart) lost -8.9%. This is not a typo my friends, panic and fear has a firm grip on the markets right now. To confirm this all you have to look at is the VIX index (chart) also known as the fear gauge, which soared an unprecedented 50% today.

I think it’s fair to say that the markets are overwhelmingly oversold and the fear factor is overdone. However, from individual investors to institutional investors, no one seemingly cares for the metrics or logic, for investors are selling indiscriminately now and will ask questions later. Which takes me back to the hysteria in the 2008/2009 crash and prior market crashes in that when the fear subsides and the forced selling ends, opportunities do present themselves. For now it’s probably best to sit on the sidelines and let the fear, panic and margin call selling abate.

~George

The markets experienced one of the most volatile weeks in recent memory. In fact, the Dow posted its biggest weekly decline in over two years. What’s more, Friday evening Standard and Poors downgraded the U.S. credit rating from AAA to AA. In my first blog of the month (blog) I eluded to the fact that August is typically a softer month for stocks, however, I wasn’t expecting this. For the week the Dow (chart) lost 698.59 points or 5.8%, the tech heavy Nasdaq (chart) lost 223.97 points or 8.1%, the S&P 500 (chart) -92.90 points or 7.2% and the Russell 2000 (chart) gave up the most ground on a percentage basis losing a whopping 10.3% on the week. Equities are most definitely in a correction mode.

Next week promises to be just as volatile as this past week, especially with the Standard & Poors downgrade of the U.S. credit rating. I think it’s important to reflect on history as it pertains to the markets. This period of time reminds me a bit of the circumstances and subsequent fear that took hold of the markets in the 2008/2009 market crash. Although the circumstances are quite different today compared to the 08 the debacle, the rampant fear and panic selling feels similar. Let us remember that after the panic selling of 08/09 was over, the S&P 500 doubled in value. I am not suggesting that we will see a repeat performance of the downside or upside to the markets, what I am suggesting is that fear and panic has never benefited any investor. Let us also not forget there are a lot of healthy corporate balance sheets out there and most likely even the most pristine companies will get dragged down by this current market environment. In times like these, cooler heads most always prevail. Good luck to all.

Have a great weekend 🙂

~George

Call it the debt ceiling debate, the European mess, the U.S. economy or a combination of all three, whatever it is, the markets have technically broken down. This week all of the key indices have broke below their respective 200-day moving averages. Let’s take a look at the Dow (chart), the Nasdaq (chart), the S&P 500 (chart) and the Russell 2000 (chart).

So what now? Although the 200-day has been violated in each of the key indexes, and technically speaking this is a bearish event, let’s now turn our attention to the Relative Strength Index or RSI. Certain market technicians utilize both the moving averages and RSI to evaluate current market conditions. The case with the RSI is whether or not an index or a security has become overbought or oversold. Looking at the charts of the key indexes, they all have now broken below the 30 value level which is the level that indicates that a security or index is becoming oversold according to the RSI metric. This doesn’t mean to go out immediately and go long this market for stocks or indexes can remain oversold or overbought for extended periods of time. However, what this does mean is historically when the RSI value breaks below 30 (oversold) or above 70 (overbought) a reversal of the trend typically occurs at some point and time.

Remember technical analysis can be a useful tool when evaluting markets, however, fundamentals and the macro environment is what typically drives the markets and looking at where we are today the markets are not very happy with the picture.

~George