Market Update

I just got back in from playing tennis all morning, did something happen?

Relax, just a little humor. The market appears to have entered a panic mode and obviously there is no way to know how long a panic will last. Yesterday and today, we took moderate defensive action consistent with when the SPX breached its 200 DMA and are prepared for more defense if circumstances dictate.

Europe is obviously a concern but it has been a concern (or at least it has been a concern of mine for years) for a very long time. If this turns out to be the big one then those who have avoided or underweighted Europe (meaning big Western Europe and the crisis countries) will fare better. If this turns out to be the big one then those who have avoided or underweighted US financial stocks will fare better. I've been writing about this for years and have been positioned accordingly for years.

In terms of normal cyclicality I mentioned last weekend that I think a recession is now in the cards by virtue of the GDP reports and the ISM data so our initially modest defensive action for now has focused on the industrial sector. I also think that our having peeled back Australia earlier is helping us now.

A big focus of my writing is about avoiding emotional reactions to days like this. All today was for me was a little more work. Over the years I've tried to really hit home on the fact market declines happen as a function of normal market behavior. People tend not to fear the familiar in other aspects of life so hopefully they will not fear the familiar in the market.