March 16, 2011 Market Update
As I stated on Thursday of last week, the markets are going
to provide lots of food for thought.
Monday and Tuesday of this week we watched as the TSX
dropped quite heavily two days in a row. The American markets fell even
harder than the Canadian index. Currently the Canadian market is up a
little but it is only 10:00 AM. Both the S&P and the Dow are down in the US
and all of the main European markets are trading down today as well.
Take a quick look at this link below. The S&P is trading
below the 20 and 50 day moving average and bouncing against the 100 day moving
average. There are many traders that use various computer models and
trade based on these moving averages. They will be selling as this market
breaks down.
http://www.theglobeandmail.com/globe-investor/markets/indexes/chart/?q=SPX-I
Also, many market pundits will be suggesting that you not
panic and I agree with that. However, if you are holding any equities in your
accounts you may want to seriously consider selling them. An ounce
of prevention is worth a lot. Just look back at what happened in 2008.
And this downturn in the markets is more than just a result of what happened in
Japan. The banks are still very week worldwide. Countries like Ireland,
Portugal, Spain as well as countries like the US are up to their eye balls in
debt. As a matter of fact, there is more debt in the world today than
there was in 2008 and it was agreed that debt was the cause of the market
meltdown than.
I am also concerned about commodities like gold, silver, oil
etc. What happened in 2008 was that once the free-fall started in
earnest, these commodities also fell as it became a case of people having to
sell everything to raise the cash required to meet their margin calls.
Remember that many traders and funds are buying and selling with borrowed money.
So when their security drops in value the lending institution requires that the
increase the cash in their account so that there is always adequate security
for the lender.
As always, be aware of what is happening and remember that
not losing any money should be rule number one for all investors.