Thursday, July 31, 2014

Dow Industrial Average Closes Down More Than 300 Points; What To Do

The Dow Jones Industrial Average fell 305 points, or 1.8%, to 16577, today The S&P 500 shed 38 points, or 1.9%, to 1831 and the Nasdaq Composite Index dropped 94 points, or 2.1%, to 4368.

The decline resulted in dragging the Dow and S&P 500 lower for July, leaving the blue-chip benchmark down 1.5% and the S&P 500 down 1.4%, for the month. This is the first monthly decline this year.

Who expected this?

Here's a timeline of what I wrote in the EPJ Daily Alert:

On July 11, I wrote in the ALERT:
I believe growth is too strong to start shorting aggressively, but this is no time to be accumulating stocks,aside from those that benefit from price inflation.
On July 25, I wrote in the ALERT:
The latest data from the Federal Reserve shows annualized money growth at 3.3%. This is a drop of 70 basis points since last week and a decline of 570 basis points since the peak growth rate for this cycle of 9.0%, which was reached at the start of this year. This is the 10th straight week of decline in money growth. The money growth numbers have become extremely erratic under Bernanke-Yellen. In fact, it does not appear that Yellen pays any attention to them at all.... It is very dangerous to be accumulating stocks at present, outside of those that will benefit from price inflation. I am very likely to recommend shorting the stock market if money supply growth breaks below 3%---which could occur as  early as next week...
Short-term traders should already be trading from the short side.
This Monday, I wrote:
This will be a big week for news. Because I am getting bearish, the key to trading this news, as I state above,  will be to short any upticks.
On Tuesday, I wrote this:
The two day FOMC meeting starts today, with a Fed statement on monetary policy scheduled for 2:00 PM ET tomorrow. As I indicated yesterday, short-term traders should short any strength. Aggressive traders might want to short any strength that occurs even before the FOMC statement has been released.  Yellen has proved to be quite the dynamo with her statements and comments. They have led to stock market upticks after them in the past BUT we are now in a different environment with slowing money growth and many indicators that the Fed watches signalling strength, thus any surprises may come on the down side, from a more slightly cautious Fed.
Yesterday, I wrote:
In recent days, as money growth continues to plunge, and the market looks toppy, I have switched my advice for short-term traders from one of buying dips to shorting strength.
That would have worked out well this morning after the GDP release. A stock market early rally sparked by the GDP number faded quickly. The Standard & Poor’s 500 Index (SPX) is down 0.2 percent to 1,966.43 as I write, after rising as much as 0.5 percent earlier. 
Short-term traders should continue to trade from the short side. The potential for a major break is increasing.

NOTE WELL: I don't believe what occurred today is the MAJOR BREAK, that is still ahead of us---but with price inflation heating up, there is no sure fire place to put all your assets and be comfortable.

These are extremely volatile times. Money supply growth, price inflation and the overall economy needs to be monitored very closely. I monitor these factors and more in the ALERT, with ALERTs out every day Monday thru Friday (except holidays). 

In the EPJ Daily Alert, there is commentary for short-term traders, long term investors, those holding stocks, those holding bonds, silver and gold investors, and those considering buying a house or real estate.It is the information you need to know, arriving in your email inbox daily.

There are four ways to subscribe to the EPJ Daily Alert HERE.

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