Making Money Alert
The Bear Pops out of the Den
10/05/2011
On Tuesday, the bear stuck his nose out of the S&P 500 den ever so briefly. But apparently, he didn’t like the way Wall Street smelled. Well, at least he didn’t want to hang around long enough to make his visit an official one. At one point in the trading session, stocks in the S&P 500 Index had come down more than 20% from the previous high. That’s officially a bear market. And while we did escape closing in the bear’s clutches thanks to a late-day rally, this grizzly is by no means out of the proverbial woods.
The reversal off of official bear territory was encouraging for stocks, as it shows there is buying support at the 1,075 level. However, until the many unknowns putting pressure on this market (Europe ’s debt crisis, Friday’s September employment report) become, well, known, I think we are liable to retest those bear market levels.
Avoiding the bear is an important step toward a healthy comeback for large-cap domestic stocks; however, in many sectors, the bear already has taken up residence. In fact, four of the 10 S&P 500 sectors are in official bear market territory, and they include Energy, Financials, Industrials and Materials. I suspect we could see other sectors take the bear plunge before the selling subsides, so I want you to make sure that you stay defensive and not put your money at risk before first seeing a clear bottom.
I’ve heard some argue that Tuesday’s reversal in the S&P 500, indeed, may mark that inflection point between a market that continues falling and a market on the road to recovery. I hope that these voices are proven right, but I really don’t think they will be. If I’m proven wrong, I will be happy about it, as it means that this market will be heading higher. It also means that I’ll be able to start putting more money to work in my advisory services. But when do you know when it’s safe to get back into stocks? When do you know if a turnaround is for real, or if it’s just the calm before the next bear rampage?
For more than three decades, my Successful Investing advisory service has been using a simple, trend-following method to determine just that. If you’d like to find out more about just how we accomplish this task, then I invite you to check out my Successful Investing advisory service today.