Pounding on the Old Low’s Door

November 12, 2008
By seadmin

The market is once again back into freefall mode after a brief flurry to the upside in the final week of October. So far, November hasn’t been one to remember for most stock investors.

In fact, stocks now are pounding on the door of the previous lows set just three weeks ago. With stocks off nearly 10% so far this month, it’s even more important than ever for you to take a proactively protective posture in your portfolio.

As you may know, I’ve been singing the virtue of cash for nearly the whole of 2008, and that melody is certainly resonating with fed-up equity investors who wished they had acted upon my advice.

Take a look here at the chart of the S&P 500 SPDRs (SPY), an exchange-traded fund (ETF) I use as a proxy for the domestic equity market. (Continued Below)

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As you can see, after a brief but intense move to the upside to close out October, we now are very close to those old lows. It’s important, however, to note that on Oct. 10, SPY closed at $89. We fell under that mark on Oct. 23, with the ETF trading at $84.

Today, Nov. 12, we saw SPY close at $85.69, and as of this writing the shares are below $87. I suspect that the support level here on SPY is a key measure when assessing its future. If the $84 level holds, we could be looking at a substantive rally akin to what we saw in the final week of October.

If, however, the bears break the door down on that $84 support line, it could mean another 10% or greater descent into the abyss.

The question here is what are your options aside from turning off your computer, your TV, and getting away from it all with a trip to Europe?

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