Raising the Red Flag Higher on the Stock Market After the Nasty Columbus Holiday Action
While yesterday's fall in stocks occurred on a day when the bond market was closed (and some will therefore dismiss the action as taking place on the Columbus Day holiday, a kind of "semi-holiday,"), the fact remains that the declines were accompanied by increasing volume - something that forces us to take the drop quite seriously. In fact, although our last two posts were quite temperate, it's time to raise the red flag higher now.
Yes, raise the flag, despite the fact that the percentage of decline (a bit more than 4%) still remains less than that we experienced at the beginning of 2014 (over 7%). Here's the progression that's caused us to become not just more vigilant, but more alarmed.
On October 9th, we said we were able to dismiss the initial falling prices as a "lot of noise, at least when it comes to the the major trend of the market." Then yesterday morning, before the opening bell, we noted that "Friday's close down over 100 points on the Dow and the commensurate fall in the Transportation Index begins to raise red flags. If we see either or, more importantly, both of these averages fall below their August lows, we raise the red flags even higher."
Well, both the Industrials and the Transports simultaneously fell below their August lows. That's why the flag will be raised higher. Next we look for the inevitable turn-around to see if the bounce off the lows (which, by the way, is not assured yet) climbs above the recent September highs just shy of 17,300. It could happen. But if it doesn't we may be heading for rather nasty declines the rest of the year.
So it's red flag up, eyes peeled. We wait and watch.
Yes, raise the flag, despite the fact that the percentage of decline (a bit more than 4%) still remains less than that we experienced at the beginning of 2014 (over 7%). Here's the progression that's caused us to become not just more vigilant, but more alarmed.
On October 9th, we said we were able to dismiss the initial falling prices as a "lot of noise, at least when it comes to the the major trend of the market." Then yesterday morning, before the opening bell, we noted that "Friday's close down over 100 points on the Dow and the commensurate fall in the Transportation Index begins to raise red flags. If we see either or, more importantly, both of these averages fall below their August lows, we raise the red flags even higher."
Well, both the Industrials and the Transports simultaneously fell below their August lows. That's why the flag will be raised higher. Next we look for the inevitable turn-around to see if the bounce off the lows (which, by the way, is not assured yet) climbs above the recent September highs just shy of 17,300. It could happen. But if it doesn't we may be heading for rather nasty declines the rest of the year.
So it's red flag up, eyes peeled. We wait and watch.
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