What's the Market Saying? Growth Is 'In Check'

Maier Talbow, Raven Securities
Maier Talbow, Raven Securities

Forget about "bargain hunting" or "buying the dip" these days. Until the market proves it's back in bull mode the only cliche investors need adhere to is "don't try to catch a falling knife," says Maier Tarlow, senior managing director at Raven Securities, from the floor of the New York Stock Exchange (NYX).

The S&P 500 ($INX) is down more than 10% from its most recent high, putting it into a full-blown correction, and Tarlow believes it could drop another 10% into bear-market territory before the buyers come back with conviction. Never mind what the fundamentals at home and abroad may say. If the market is dropping like a guillotine, why stick your neck out?

"Retail investors should take note that the market acts as a barometer, not a thermometer," Tarlow says. "The market is a forward-looking vehicle as far as growth is concerned, and the market has been telling us that things are in check. That's pretty blatant to everyone out there."

What makes this market treacherous is the momentum of the decline, Tarlow says, with down days coming on heavier volume and rally days running on fumes. At times like this, there's nothing cowardly about taking profit and sitting on cash until the correction runs its course.

"Until we see a great rally on better volume and follow through the day after, we're kind of staying away from the long side on equities," Tarlow says. "Don't try to catch a falling knife. It's a very dangerous proposition."