Tuesday, December 6th, 2016

Why the current stock market selling off ?

The market is in the hands of bears today.They have an upper hand. No use fighting this.

We have been talking about it for most of this month. We know what is causing it. Let me recap the same thing again. It was war drums that spiked Oil futures and the gas prices went to $4 and that started taking its toll sooner than later. That in turn undermined consumer confidence and business owners and they started hiring less. It finally showed up on Friday’s unemployment report with only 120,000 jobs added. That was a horrible number given the expectations built up during last three months. It triggered the stock market sell off this week.

You have to understand, the economy was recovering on a slippery slope and if you push it down a little and it goes reeling down from there on the slope. These clues built up and work their way through many factors and eventually things start unraveling. Remember what happened in August 2011? The debt crisis and eventual credit downgrade? What followed than? A huge market sell off and no jobs added in the month of August and weak additions to labor force till December 2011. This has been the pattern for the last 3 years. Start and go and than collapse. The economy never gets a solid lift off or a push that will put it on an outward bound trajectory.

The reason economy does not gets off because the conditions to regrow the economy are not fully met. There is no environment for keeping optimism alive and prosperous feeling and a place where the country feels secure and sure footed. There are always some wars and mayhem and lots of ” uncertainty” and the financial markets do not like this kind of environment nor does human nature. We are all conditioned and gravitated towards peace and prosperity and when we do not get that we react differently. We act unsure, we worry what tomorrow will bring, and we worry and what may go wrong. We postpone business decisions, we  postpone hiring, we do not go out on the limb. We become risk averse and revert back to what ever security we can get. This is what has been so evident in the last three years and the financial charts are a great testimony.

What we did here we eased off our positions and went back to side lines. This was not by accident but by design. The slow train was easy to spot to get out. All you have to do is rewind my Technical analysis videos of this month on our membership site. We are sitting here nicely today. Here is an Intra day chart of SPX and you can click to enlarge.  All other indexes have same deep incursions to the downside.

What is happening this month in stock market is a correction. The stock market is selling off and SPX has broken below its 50 day moving average on heavy volumes as of this writing. This may continue for few days till a Technical bounce may come. The market is however getting oversold at these levels. It may bounce back, and than slide again, on a lack of conviction. Short term it is a downside slide.

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