Slipping Into The End Of The Quarter

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Aimless meandering describes best how the markets drifted through the day yesterday and ended up with slight losses.

As this month comes to an end, we may see more of the same with the major indexes completing what looks to be their worst quarter since the beginning of 2009.

Volume was light and may continue along the same path until Friday when the ever important nonfarm payroll employment numbers will be released. While the G-20 nations vowed to cut their deficits substantially over the next two years, the market showed no reaction one way or the other.

It looks that this quarter will end on a negative note with the Dow being down -6.6%, while the Nasdaq and S&P; 500 have given back -7.4% and -8.1% respectively. Most of that damage occurred during May’s correction.

Our domestic Trend Tracking Index (TTI) recovered slightly from last Friday’s close and has now moved to +1.49% above its long-term trend line.

Reader Steve followed up with a comment to last Sunday’s post titled “A 2-year Anniversary:”

It appear this market is declining much like the initial decline in 2008, a little each day until it hits panic levels and selling really takes off. Do you see the same pattern?

Yes, I see the same pattern, although much smaller in size. However, it does not mean that the markets will crash again once we break through the trend line and move into bear market territory. We may very well see a slow but consistent decline in prices, which can become very painful for those who continue to hang on to equities (remember 2001?).

No one knows for sure, but it’s imperative that you make plans to move your portfolio to the safety of the sidelines, whether the eventual outcome will be in form of a crash, a slow decline or even a whip-saw.

In these times of economic uncertainty, being cautious and defensive will very likely prove to be the best course of action.

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