Warning Signs Still Shine

The warning signs that flashed in mid-May about a deteriorating condition for the stock market continue to shine. As the markets settle this Friday, the Dow Industrial's are down about 3% on the week and the Nasdaq Composite is down about 4.3%. Multiple worries are justified. Oil prices near $80, mid-east turmoil, higher interest rates, a slowing economy-all hinting at lower corporate earnings and hence, lower valuations for stocks. Chart reading shows that the last two day's action was enough of a retreat to negate the powerful two day punch of June 28-29; at that time appearing to be the start of a renewed upswing. Sure the market could rally 100-200 points on any given day, but the risk now has increased to hold meaningful positions to wait for one good day to make some money. So, I recommend to hold your winning stocks, set price points to sell on continued weakness, and limit losses on new positions to 7-10%. I've made very few purchases for managed accounts the last 7-8 weeks, and the couple utility and bank stocks bought appear to have held up reasonably well. Keeping the majority of your funds in short term bonds or the money market fund paying near 5% is prudent at this jucture.