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Stocks are breaking down because:

1) The bull run begun in April is more than overdue for a correction.

2) The Fed has signaled that it might not cut rates again in December.

Regarding #1, the bull run begun in early April has been ludicrous in its strength. It is NOT normal for stocks to go straight up. The mere fact the S&P 500 had gone 130 sessions without touching its 50-DMA moving average indicated that stocks were due for a significant correction.

Moreover, both high yield credit and breadth had signaled that the S&P 500 had more downside to go. This downdraft was signaled well in advance to those who were paying attention.

Which brings us to #2.

Multiple Fed officials have signaled that they are not on board with another rate cut at the Fed’s December meeting (December 9th-10th). This, combined with stocks being overbought and overextended above key moving averages, has resulted in the market struggling to rally.

Stocks are on the ledge of a cliff. What happens next is critical!

In this context, the #1 question for investors is whether the bull market has ended and it’s time to “sell the farm.”

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