The recent volatility is enough to make one step back, put your money aside - and reassess. In fact, this is what both institutional and individual investors have done over the past 3-weeks as money withdrawn from funds has significantly increased - even more so than at the March-2009 panic low. Perhaps this is part and parcel of the "death of equities" genre that is needed for the next bull market to begin; but for now...the pullout appears prescient.


Technically speaking on the S&P 500 index, we should point out that two of our longer-term moving averages were violated in bearish fashion - the 15-month and 45-month moving averages. In fact, there are only two occurrences of the 45-month moving average being broken since 1980, which rather interestingly occurred during the past two bear markets - which suggests a bear market has indeed begun. In each of the previous cases, the S&P 500 bottomed -27% and -33% below this level. At present, the S&P stands a mere -4% below this level, which would lead one to believe that another 20% to 25% decline is in order. This is serious stuff to be sure.

Therefore, rallies are to be sold until further notice. If we are wrong, then we would use a breakout above the 15-month as a sign that new highs are ahead. But that isn't the preferred viewpoint at present.

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