Isn’t it nice to be in cash on the sidelines during this decline? The GMI issued its Sell signal on 9/26. All of the pundits are rushing to explain the decline by things happening now. However, the GMI picked up on a decline long before these events. One must follow the market, not the news. The GMI will likely flash a Buy signal long before the news turns positive. Remember how most pundits were skeptical of the market’s rise that began in 2009!
The market will retest Wednesday’s lows and I suspect even if they hold, the market will eventually go lower. This still mini-decline could turn out to be the prologue to a major bear market. It takes a while for the 30 week average to curve down. Time will tell. Meanwhile, take a look at the weekly chart of the SPY. Note how small the current decline appears compared with the decline in 2011.