Is This the Start of Something Big?

It was the first really rough week in over 10 months. Yes, I’m talking about the nearly across-the-board selling we witnessed in stocks last week — a sell-off that slammed the major market indices approximately 4% lower. The S&P 500 Index actually broke below its short-term, 50-day moving average last week, a clear sign that the mood of this market has shifted.

Now, could this most recent decline be the start of something big? Or, in other words, are we about to see a sharper sell-off? While it is too early to tell for certain, one thing that is certain is that in order to protect yourself on the downside, you must set a stop loss on all of your invested positions.

Subscribers to Successful Investing, High Monthly Income and ETF Trader advisory services all have preset stop losses on every invested position, and just recently, we were stopped out of several positions with some very nice gains.

Finally, today we received word from the Federal Reserve that interest rates will remain at near zero. The Fed vowed to keep rates at their current levels for a while in an effort to stimulate economic growth. 

Interestingly, the vote to hold rates at current levels wasn’t unanimous. One Open Market Committee member, Kansas City Federal Reserve Bank President Thomas Hoenig, actually voted against keeping interest rates where they are. Mr. Hoenig wanted the central bank to eliminate a phrase in the language vowing to keep rates exceptionally low for an extended period.

Could this be the start of something big in terms of a change in Fed policy? It certainly could be, and this is a development I’ll be watching very closely in the months to come.