Waiting for a Catalyst, Watching the Fed
This column was originally published on RealMoney on Oct. 31 at 12:12 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.
Most investors know that October is housecleaning month for the mutual fund industry. With the fiscal year-end at Oct. 31, fund managers prune their portfolios, dumping their losers. The recent selling pressure on the broader market can be partially attributed to this. With that behind us, the market should gain some room to move to the upside.
I am looking for a catalyst that will get the market out of its doldrums. Perhaps it will come from the Federal Open Market Committee meeting Tuesday, additional declines in oil prices or evidence that inflation is benign.
For anything other than very short-term moves, it is important to understand the underlying conditions that are affecting the market. After all, if you don't have a good thesis for your positioning, every little jiggle in the market will elicit a reaction from you. Rather than go down that bumpy road, focus on understanding the bull and bear arguments. If you know both sides and then choose, you are better able to control your own destiny by making a conscious choice based on more complete information.I believe the current volatility in the market is due in part to the absence of clarity with respect to some very fundamental economic conditions. There are several questions that I'll need answered before I'll feel any degree of commitment to the bull or the bear side:
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