One look at the chart tells you that yesterday could have been a real bad day in the markets. An early rally of 145 points in the Dow was completely wiped out as the markets briefly dipped into negative territory as a result of a sharp sell-off in the financials.
Things looked pretty bleak at that moment; however, decent economic news proved to be the savior and a rebound and pulled the major indexes out of the doldrums. Uncertainty about market direction is bound to continue especially in view of the Fed meeting and Friday’s all important employment report.
I took the opportunity today to liquidate those holdings which had triggered their preset sell stop points during last Friday’s drubbing. Only time will tell if this move is in sync with the overall trend. If not, and the markets resume upward momentum, I will look for new entry points. For the time being, I am comfortable with a little less exposure to equities.
As an aside, Mish at Global Economics wrote a nice piece titled “Is Debt-Deflation Just Beginning.” It’s a bit lengthy but well worth the read if the deflation/inflation scenario is of any interest to you.
I am in the camp of those who believe that deflation will be with us for years to come, before any inflationary scenario can actually play itself out.