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What started off as a mood swing has now turned into a wake-up call.

We’ve been able to ignore a slew of bad news for months. But now, the S&P 500 has dropped 8% since September 2, including four straight drops through today. Markets and investors are feeling a little anxious.

There’s a lot to feel anxious about, too. Everyone is waiting for Congress to pass more economic aid. Now, there’s an empty Supreme Court seat, another issue for lawmakers to focus on. And the Presidential election outlook remains uncertain. If that’s not bad enough, coronavirus concerns are starting to pop up again. It’s getting cold outside and cases are starting to spike. In fact, the United Kingdom is weighing new restrictions to stem an increasing case load.

Is this another big selloff like we saw earlier this year? While no one knows for sure, we’re still optimistic that this dip will be bought soon.

Stocks may have run too far, too fast this summer, so this could just be a few steps back to normal. On September 2, the S&P 500 closed 16% above its 200-day moving average, a line Wall Street technicians study to gauge the long-term direction and speed of the market. That was the biggest divergence since 2009. In fact, the S&P 500 is back to where it was trading just two months ago.

The next technical level to watch is the S&P 500’s 100-day moving average at 3,186. Over the course of this rebound, the moving averages have worked well as support (levels that stocks have a tough time falling below) and resistance (levels that are harder to push above). Falling below a moving average is typically a sign stocks could drop further.

We’re also seeing evidence of profit-taking in different sectors. Technology stocks, the leaders in the market recovery, are the ones getting the hardest hit now. Some areas of the market, like industrials and utilities, are holding up much better.

When markets break away from their long-term trends, it’s worth keeping an eye on. Another thing worth watching? Your goals. Everybody’s situation is different, which is why managing your money based on your own situation is so important. Don’t make decisions based on the market’s daily movements. Remember, over the long-term the market tends to provide positive returns on average.

That said, if these market swings are making you queasy, it could be worth considering a move from stocks into less aggressive investments.

Callie Cox, senior investment strategist, contributed to this article.


 
Speech bubble icon next to text "Expert Take"

Headshot of Lindsey BellLindsey Bell is Ally’s Chief Investment Strategist, responsible for shaping the company’s point of view on investing and the global markets. She is also President of Ally Invest Advisors, responsible for its robo advisory offerings. Lindsey has a broad background in finance, with experience on the buy-side and sell-side, in research and in investment banking and has held roles at JPMorgan, Deutsche Bank, Jefferies, and CFRA Research.

Lindsey holds a passion for teaching individuals how to become successful long-term investors. She frequently shares her knowledge as a guest on national news outlets such as CNBC, CNN, Fox Business News, and Bloomberg News. She also serves on the board of Better Investing, a non-profit organization focused on investment education.


The opinions expressed here are not meant to be used as investing advice. For more information, visit our website.