How To Interpret Yesterday's Sell-off

Several factors can be cited as contributing to yesterday's sell-off which has carried over into Asian and European trading on Thursday morning:

• The familiar buy on the rumor sell on the news phenomenon concerning Obama's victory
• The fact that many global indices had recovered back to key levels - either 38% retracement levels or 50 day EMA's (in several cases these had converged)
• The realization that despite all of the hope surrounding a new Administration the fact remains that there are profoundly weak economic fundamentals
• The ADP report brings into focus the fact that the Department of Labor's data to be released on Friday could be alarmingly weak
• Mounting evidence that credit is still not readily available to small businesses and consumers.

I continue to look carefully at the banks and the financial services sector as it seems that until we see a real convincing bottom in place here we shall have fits and starts in any recovery efforts in the broad market. As the banking index (^BKX) illustrates there has still been no decisive change to the notion that rallies are being used by traders and fund managers to exit short term trading positions. Coupled with this, there is still very little evidence of any rush to climb aboard a train that is leaving the station.

In overall terms we may see a further attempt in today's session to discount Friday's employment report as has been customary in recent months.

Disclosure: No positions