While the indices managed some positive action today, the market closed weakly again. It certainly wasn't an impressive bounce after the carnage of the last two days.
Overall, it was a very chaotic and difficult week for the market. There was a slight oversold bounce Monday similar to what we saw today. Tuesday rallied further as speculation about the election swirled. Much of the action was illogical and if you were confused by it, you weren't alone.
Many market players were hoping to see a relief rally after the election as market players celebrated the end of that distraction. Instead, the market sold off hard as many were bitterly disappointed that the candidate viewed as more friendly to business lost. But the renewed focus on the fiscal cliff seemed to produce the majority of selling pressure.
I'd really like to tell you that we are close to the end of this poor action but I have no basis for writing that. Yes, the market has pulled back quite a bit already but there is no reason to believe that it won't continue. In fact, given the uncertainty created by the fiscal cliff, the growing issues in Europe and the lousy third-quarter earnings, there are good reasons for the downside momentum to build.
If you are a trend-follower, it doesn't matter anyway. You should be on the sidelines and waiting for the action to improve. The pundits and those clever folks on TV can gain attention by predicting when it turns, but if your goal is to protect your capital and make money, ignore them and wait for the market to prove itself.
The good news is that the trend will eventually shift. It always has and always will. We just need to wait for it and then we'll be able to ride things back up again. Many things in this world change, but the cycle of ups and downs in the stock market never will.
Do something fun this weekend and forget this ugly market for a while. I'll see you on Monday.