Today's Market
by Dr. Invest

We have just seen what is commonly called, THE DEATH CROSS. This is where the 50 day moving average falls below the 200 day moving average. Typically, this marks a downward trend in the market. Eventhough we are seeing a rebound in the market, this coming week we will be getting reports on home sales and the continued reports on the PIIGS, with continued concern on Greece, Spain, and Italy. France has just come under the scrutiny of the S & P and is in danger of a credit downgrade.

Those in a rush to get back into the market, may well find themselves subjected to major losses in a market that declines 600 points on a whim. Look at the the table below and you will see the statistics pointing to index performance after a DEATH CROSS.



What we can gather from the above chart is that after a DEATH CROSS, the market performs poorly. There is a higher likelyhood that the DOW index will lose value over the next month, than gain. And even after the first month, the following months for the DOW is less than stellar. A bear market does not always occur after a DEATH CROSS and the further you move away from the Death Cross, the more likely you will have a better performance. Inspite of the dramatic ups and downs of the past week, we are still down 200 points.

A knowlegeable trader can find opportunities whether the market goes up or down, but trades cost money and with each trade are opportunities for failure, as well as success. My goal is not to take risks, but find the optimum season for success. Considering the above chart showing returns the month after a DEATH CROSS, the unpredictability of the present market, and the fact that the months of August and September show poor performance for stocks, it would be best to stay out of the market for now. If you have a cash position, hold it! If you have a long-term buy and hold position, then you shouldn't be terribly concerned about these temporary market fluctuations.