Sneaky Sell-off

The market has had 6 (soon to be 7) down weeks in a row.

-Economic indicators have hinted towards slower growth than anticipated.
-The Fed is ending its QE2 program this month.
-Greece's continued debt problems are creating panic across the globe. 

These concurrent issues have sent the major indexes moderately lower over the last month and a half.  Panic selling is beginning to take hold. Recent 'scary' headlines include "mutual fund outflows and swap spreads are at levels not seen since the end of last November." The catch is November 30th marked the beginning of a 10% rally in the stock market. Then you have corporate profits at high levels and forward P/E ratios indicating attractive valuation. So what should we believe?

The market has been doing very well, and at this point there isn't much reason to panic. A sell-off might even turn out to be a good thing if we can put money to work at cheaper prices. However, the momentum is to the downside right now and it is tough to fight the current. I will be slowly picking my spots from here and protecting with options when possible. Taking short positions as a short-term hedge is a good idea too. This sell-off may have some ways to go, but at some point we should resume the up-trend.

Sean