Market Comment


After gaining more than 1,575 points from Oct. 3 to Oct. 28, the Dow Industrials have slumped nearly 3.5% amid fears of contagion related to Europe's worsening debt crisis. The Dow Transports, after gaining more than 986 points from Oct. 3 to Oct. 27, have dipped about 5%.

For now, labeling the late-October closing highs as significant points seems premature. But if the market's recent pullback becomes a full-fledged correction, those points of 12,231.11 in the Industrials and 5,025.09 in the Transports will qualify as significant. Of course, if both the Industrials and Transports move below the respective Oct. 3 closing lows of 10,655.30 and 4,038.73, the bearish primary trend will be reconfirmed — and the late-October highs will have no significance under the Dow Theory.

While we are slightly reducing our bond-fund position this week, we intend to hold a meaningful cash position until the Dow Theory is in the bullish camp. For now, our buy lists have stock-market exposures of 78% to 79%.

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