Sell-Off Signifies Increased Risk

Monday, May 30th
A recovery in stock prices last week to the tune of 1% to 1.2% in the S&P 500 and Dow Industrials erased about one-fifth of the damages since early May. Today would have marked the fourth day of accumulation in the stock market, a positive sign in which stocks gain on increased trading volume. As the stock market often moves in waves, it's important to watch for when the next wave will build up and provide a decent surf.
As institutional portfolio managers (banks, pension and mutual funds) have the deep pockets to move stock prices, it is important to watch their actions. The selling today was of concern as it marked a distribution day (falling prices on increased volume). That should make it harder for buyers to step up and commit money to stocks.
Many stocks have fallen more than the general market since early May and have been sold from client portfolios to preserve capital. When the market follows through and starts a fresh leg up, have your buy lists ready to commit more funds to stocks. Stay tuned.