Short answer: Not yet.
Long Answer .....
With the Dow Jones (and all major indexes) Significantly down today, it begs the question: is this the buying opportunity we've been waiting for?
If you recall, I said many many times over the past few months that we were due for a trip down to 13,000 on the Dow. The Dow, however, broke through 13,000 to the downside on a closing basis. This is not good news. The bullish trend that has been in place since the summer is now in question, but it is not fully dead. You see, we needed to stay above 13,000 in order for the thesis of continued strength in the markets to remain in tact.
At the same time, the transportation index didn't break down into a similar new intermediate low. This is good news ... sort of.
So the end result is more divergence between the indexes, which means more big rallies and sell-offs, thus continued volatility. One prudent move might be to buy the VIX during a time of market calm (as long as the current fundamentals stay in place). With another debt ceiling debate fast approaching and with the senate and house divided, owning Gold and Gold miners (like the GDX and PHYS) will provide some protection and capital gains.
As far as the Dow Theory, we need to watch to see if the indexes hold above their last intermediate lows (Dow 12,101, Trans 4,847).
In short, given the information at hand, buying OR selling the market indexes right now is a gamble we are not willing to take.
That said, it's a long way down to Dow 12,101, so we can use the Transportation Index as a proxy to see when a good buying opportunity might shape up.
Our best entry point will be if a series of new intermediate lows are produced, and the lowest of them is confirmed by both averages, as was the case June 4, 2012 when both indexes confirmed the intermediate reversal.
We will also be watching to see if the Dow closes below it's 50-day moving average on the weekly chart. This 50-day moving average is currently at (about) 12849.65. Closing below this on the weekly chart would not be a very good sign. The chances are moderately high from our perspective given the breach of 13,000. The only tail wind right now is the fact that the Transportation index has managed to hold steady.
According to some sources, we may be seeing the markets pricing in the fiscal cliff. If this is the case, watch for this to be fully priced in soon. It's coming, and everyone knows it, so Mr Market is going to do due diligence ahead of time as much as he can. Ironically, it's not the things we know about (unemployment, the fiscal cliff etc) that we need to worry about. It's the things not being talked about and that are coming next quarter or next year; baked in the cake, which need our attention now. One example is the commodities inflation slowly being caused by both Fed Actions and Chinese stimulus spending. Inflation hasn't shown up yet, but it will.
There are other big unknowns lurking around that are not being talked about. Portugal, Spain and Greece are large problems that are only getting larger as time goes by, the US will have a debacle of a debate over the debt ceiling and S&P has already warned of another rate cut on US debt. Keep one eye on these things, and continue to stick to companies with strong balance sheets, low debt and sustainable dividends.
Steady as She Goes ...
R
