Don't Be Surprised

The reasons for the stock market's pullback the last couple of days aren't surprising. For reference, see my post in September titled "Known or Unknown". The magnitude of the moves is what has gotten everyone's attention, and understandably so. However, if we take a step back, much of this could just be a combination of 2 things: first, a sector rotation from growth oriented industries (tech, for example) to defensive industries with decent yields that have been ignored (such as consumer staples, telecom, utilities, etc.). Secondly, technical measures that have been triggered. Benchmark indices such as the S&P 500 have broken through their 200 day moving averages. The 200 day MA is seen as a support level. Once the price breaks through that level, a new floor is sought. I would not be surprised if we dropped another 4-5%. I also would not be surprised if the index slowly began to recover as some long-term investors buy the dips. My suggestions: let your personal situation drive you, not the markets; also, keep an eye on earnings season & the guidance going forward.

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