Unto itself, yesterday's modest stock sell-off was not a big deal. But...
The next few trading days could become the most important period in several months for the stock market. Here is what the tracking group looked like through yesterday's close, versus respective 2004 highs.
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SELECTED STOCK-MARKET MEASURES
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2004 Highs 10/05
10/05 ----------- Versus
Close Close Date High
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NYSE Comp. 6679 6780 03/05 -1.5%
S&P 500 1134 1158 02/11 -2.1%
Wil. 5000 11059 11314 03/05 -2.3%
Russ. 2000 587 606 04/05 -3.1%
DJIA 10178 10738 02/11 -5.2%
Value Line 367 387 04/05 -5.2%
NASDAQ 100 1462 1554 01/26 -5.9%
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Average -3.6%
Median -3.1%
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Since the above highs were made earlier this year, the market simply has been unable to mount a rally durable enough to punch through them. However, four of the tracking group's components are now within a reasonable distance of another shot at new highs.
Yesterday's sell-off certainly was no big deal, unless it were to follow through on the downside. Then it could become a bigger deal, giving the appearance of yet another failed rally. And I think a decent case can be made for a volatile, troubled period immediately ahead.
There's the continuing threat of domestic terrorism, of course, heightened materially by the rapidly approaching national election. Considering where the major sentiment measures are at present, the stock market is ill-prepared for such an event. It would get creamed!
But is it possible the ingredients for another kind of terrorism of sorts are beginning to coalesce. Suppose, for instance, the Presidential election segued into out-and-out chaos? I sense this as a growing possibility.
Something is up with the huge quantity of new voter registration throughout the country. Where I suspect this is leading is massive voter fraud throughout the country on 11/2, or at least what will appear as such -- something akin to what Florida-2000 spawned, but on a much, much grander scale!
Taken to an extreme -- something not to be ruled out, in my view -- it could leave the United States in political chaos on the morning of 11/3. I believe the initial foreign reaction would be very harsh, hitting the dollar hard, which would spill over quickly to higher interest rates, significantly lower stock prices and a major spike in the price of physical gold. In the case of the latter, meaningful new highs in gold's bull market.
I will be examining this scenario in greater detail soon.
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