Market Commentary: 10/21/09

Daily Action

The action today was too hard to ignore. The market opened strong with many greens appearing on my phone. Not long after noon, the selling began. The Industrial broke below 10,000 mark at the close.

The VIX (fear gauge if you will) spiked up right before the close signaling investors are buying protections.

The reason why the market turns is a mystery. Anyone attempted to explain it is simply being paid to come up with some kind of answer. But the strong turn at the intraday suggested a weak market. I recalled seeing something like this during the 2008 declined. I'm not suggesting anyone to panic but to take caution in all your position. You may have noticed that I've sold some stocks (ABT & VIVO) to protect my capital. I suggest you be prepared to sell. Before we do anything, let's take a look at the market.

Big Picture

Stepping back from the daily movement, we see that the Industrial still has room to decline before claiming bearish. To be fully bearish, I will need the Transport to confirm. The Transport appear to have formed a "double top". The level to watch is the previous high around 3,780 or so. Right now the upward trend is still in but today action got me more defensive.

At the end of the day, I'm still a cautioned bull with more than 50% of my cash invested in equity. I am close to bringing that down to 25% but I will wait until the market tell me to. In fact, I would be happy if the market turn lower because there are many great companies from my watch list that I'd like to own but are not at an ideal level for purchase.

Buffett said "Be fearful when others are greedy. Be greedy when others are fearful."

The Dow have risen to almost 50%, I doubt this is the time to be greedy.

Art

Print this post