Stock Markets Are on the Edge and So Are People

By: Anthony_Cherniawski

I suspect that the sell-off in the last 20 minutes of the day may have been nothing more than traders taking their trades off the table so that they could enjoy an early Thanksgiving weekend.

But if that is the case, it shows just how thin and vulnerable the market is right now. Tomorrow will likely be another thinly traded day and we may see yet another episode like this, or worse, as even more traders prepare for the weekend.

So far there’s little cause for alarm, but wouldn’t it be just like the market to catch everyone when they are unawares. If this is the top, it would give us 13 trading days until December 13, the same amount of time it took for the markets to lose 20% in the July-August swoon in 2011.

This time NYSE margin debt is much higher. Back then it was $277,698.00. As of October, it was $412,459.00 and growing at a rate of 2.8% per month. Should the trend continue, that would put the November margin debt in the ballpark of $423,992.00 today! This represents about 4% of the United States Gross domestic Product.

A 4% drop in the SPX would put it below the 50-day moving average at 1738.80 and trigger margin calls that may be unstoppable. Remember, the rest of the world will be trading our stocks on Thanksgiving day, even when we are not. Tomorrow will have a full day of trading. Friday will be a half day. Although no official sell signal is given, we are now “in the window” for the reversal and a probable panic decline.

I may be available for comments tomorrow morning, but during the latter part of the day I will be helping prepare a sit-down Thanksgiving dinner for over 200 people on Thursday at our church plus delivering meals to the home-bound. This is an outreach to the local community that has been gaining momentum in the past few years. We received a favorable mention in the press over the weekend, so we have received more donations and volunteers. But the number of requests for a free Thanksgiving dinner has more than doubled in last year.

Most of these people receiving dinner are not freeloaders. They have been down on their luck for a long time and now the SNAP Program is cutting back an average of $44.00 per month per family. This represents an average 13% cut in monthly benefits, that began in November.

The Salvation Army is offering a free sandwich luncheon every Friday at an abandoned school building in Lansing. This Friday the cars were lined up around the block to get in. Soon they will be walking.

The government cutbacks are now forcing people out in the street to search for handouts. Wal-Mart has the largest crowds of shoppers for the two hours before the SNAP cards are activated at the end of the month. Then they disappear for another month. Now it appears that their food is now running out more quickly. These people will not be looking for plasma screen TVs on sale on Black Friday.

I am concerned and want to do what I can to help alleviate the hunger in my community. Frankly, I don’t know if it will be enough.

I hope that your Thanksgiving is a blessed and enjoyable one.

Regards,

Tony

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As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals

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