As we have seen in the past few days, it can be a lesson in futility trying to predict the very short-term or day to day movements in the market. What we attempt to accomplish is getting the intermediate to longer term trends right, hopefully reducing the market risk in the portfolio. The intermediate trend has been to the downside since early May and we have positioned the portfolio accordingly. Today the downtrend intensified, the S&P 500 closing down 1.7%, erasing yesterday’s modest rally and then some. An apparent delay in the solution for the Greek default and a very heavy Euro contributed to the poor action in the U.S. stock market. The one bright spot for the economy going forward could be the direction in crude prices. Crude oil finished down more than 4%, closing below 95 for the first time since February. We see a price below 90, hopefully closer to 80, as a good start to the relief of this major headwind for consumers.
The NASDAQ closed below its 200 day moving average for the first time since September 2010. None of the other major indices have done this yet. If the bulls are going to make a stand, it should be coming in the next 200 points or so in the Dow. Trade has been sloppy and loose and it doesn’t seem to feel like we are close to a bottom. If the Euro continues to trade lower in wider ranges, we don’t see the elusive bottom happening anytime soon. As we have mentioned, we are waiting for the market to give clues that better action is coming. After a day like today, it’s easy to say that we don’t have many clues yet.