The uncertainty was not lost on the markets as an orderly sell-off began shortly before lunch time today. The major market indices fell 1-1.5% closing near their lows of the day. Despite the sharp drop, the markets continue to be resilient in the face of escalating violence in several places around the globe. The markets are near its record highs and over-stretched a bit; a sell off of some significance continues to be expected. With the weekend approaching and the world uncertainty, tomorrow could be another repeat of today. It should be noted that the Russell 2000 (a small company index and a harbinger for how much appetite for risk traders have) led the markets down today falling 1.5%. Over the last 2 weeks, the Russell has been down over 6% while the Dow and S&P have been up modestly. This divergence is not to be taken lightly and will need to resolve itself one way or another as the market indices eventually all move in sync.
Earnings have exceeded expectations to this point. While only a few companies have reported, earnings have mostly been in line or above market estimates. There will be a flurry of earnings over the next week so let's hope the good results continue. We are entering into an historically very weak time of the year. Caution is a good strategy for now.
