My biggest fear was that the service version of the ISM Index would come in below 50, and it did just that, at 47.9. A drop below 50 is contraction, and like I said yesterday, combined with the other numbers we've seen, I believe we are back in a recession. As far as the market goes; the market looks out six months or more in the future, so it still isn't unreasonable that the low we saw three weeks ago was the bottom. However, a "V" recovery, in either the economy or the market, isn't in the cards, and company's earnings might be revised down, yet another quarter.
It is so hard to avoid being pushed and pulled by the global events and the economic prospects, the best thing one can do is to keep grounded by paying attention to the market internals, if there are more buyers than sellers be a buyer, if there are more sellers join them, or stay out.
We harp on this a lot, but when you realize that 3 out of 4 stocks will follow the market direction, you better understand that bucking the trend is a losing game. Obviously you can't buy and sell on the whims of one market day, thinking you are following the direction of the market. That is why we have the SSRatio. We've found it to be the best judge of the market direction because it compares the volume going into the up trending stocks to the volume in the down trending stocks, and looks at the rate of change in the number of stocks trading at above average volume.
There are other ways to pay attention to the market direction, moving averages etc., but it is important that you realize how much of a difference the market makes on the move of the individual stocks.
Sam
