Where We Are

The major indexes were little changed at the end of the week. What stands out was the heavy-duty selling, or distribution, that accompanied a sharp move down Thursday, erasing gains made earlier in the week.

A nervous market nevertheless finished nearly flat with the S&P 500 (SPY) lower for a fourth consecutive week by just -0.7% and the NASDAQ 100 (QQQQ) higher by +0.4%. However, at one point before Friday's last hour rebound, the VIX had run up +30% from earlier in the week and the S&P 500 had tagged its 200-day exponential moving average for a near "official" correction of -9.2% off its January highs. This action had the Market Rewind ETF rotation models seeking safety for the first time since the 2009 March lows.

(Click Image to Enlarge/ ETF Rewind Glossary)

A global market sell off began today, February 4th, when the British Central Bank announced that it was calling a temporary halt to its quantitative easing (also known as money printing) program to gauge the impact it was having on the British economy. This follows the U.S. Federal Reserve's announcement during its late January meeting that on February 1st it would be closing down five of its programs that have been providing liquidity to the financial system. The market rally since March 2009 has been based on liquidity and even a small reduction can cause a market drop; a large reduction can cause a crash.

Major European bourses were all down over 2% on the news. The U.S. stock market sold off strongly. All the major indices - the Dow, the S&P 500, the Nasdaq and the Russell 2000 - were already below their 50-day moving averages and are now almost certain to fall to their 200-day moving averages in future trading. If they don't hold at that level, the bull market that began last spring will be over.