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Likening the market sell-off this past Thursday (May 6) to an earthquake, this past Monday’s sharp move upward, although pleasant, was nonetheless an aftershock. It was encouraging to see stocks close at or near their highs as well as credit spreads come in. However, it was discouraging to see the Euro give back all of its earlier gains relative to the dollar.
This morning it appears as if stocks will open sharply lower as we experience another aftershock. Generally speaking, we will sit on the sides to see if investors step in to buy. A close somewhat above the opening low would be encouraging. As noted above, we recommend just keeping safe on the sidelines and look to buy or add to positions at somewhat lower levels. For those that need exposure, buy in moderation, keeping dry powder for additional purchases should the market head lower.