Important Facts about Market Sell-off

When analyzing a prolonged market sell-off (4 consecutive sessions heading into Tuesday) it is imperative to look at it from the big picture view.

Here are a few factors that must be considered during the current pullback.

• The four days of selling has been on decreasing volume each day. This suggests there is not an overwhelming number of sellers, but rather the buyers are taking a breather and the pullback could be healthy in the long-term.
• The S&P 500 is down 2.8% from a four-year high, not exactly a reason to give up on stocks.
• The S&P 500 remains above its 50-day moving average at 1372. This is an important indicator to watch because the index has traded above it since mid-December.
• A large number of stocks are also holding above their support levels, suggesting the pullback is healthy as of today. And not only do they not flash sell signals, many look like buying opportunities based on the high reward-to-risk setups.
  
• The small-cap stocks, as measured by the Russell 2000, are struggling. The index is down 5.5% from the recent high and was unable to break above the 2011 highs. Many believe this is a leading indicator that the "risk on" trade is back off. It could also suggest that the long-term trend of small-caps outperforming large-caps is finally ending.