Caution

Caution has to be the operative word. All major indexes have been falling on very high volume. These are known as distribution days because the bulk of the trading has been on the sell side. The Dow has lost over 500 points in three days on heavy volume before today and broken below the 50 day moving average. Such steep downturns will cause bounces back up to occur as the indexes reach an over sold position, do not be caught since this is not a buying opportunity. The investor has to pay careful attention to the nature of that bounce back up. In a down trending market any bounces occur on lower volume as happened today. The Dow bounced up 23 points today on lower volume after having been higher earlier in the day. It is not unusual to have a few low volume up days before another heavy volume down day occurs and the selling resumes. Until we see high volume up days we should stay on the side lines. Manage the stocks you currently own and stay with them if they are behaving well, tighten stops as appropriate. Do not add new positions in this unfavorable period since you run the risk of being stopped out very quickly. So far the down turn is not serious and we are hugging close to that 50 day moving average, lets see what the future brings.