Wall Street's postelection sell-off may gather steam in the coming weeks as worries mount about the looming "fiscal cliff" and technical weakness suggests a possible correction ahead.
The benchmark Standard & Poor's 500 closed below its 200-day moving average -- a measure of the market's long-term trend -- on Thursday for the first time in five months, and ended below it again on Friday. More than half of the Dow components are trading below key technical levels.
"I don't think you have to panic here, but I think you really want to be looking for the market to move lower for the next couple of months," said Frank Gretz, market analyst and technician for Wellington Shields & Co., a brokerage in New York. "I think the next rally is the rally you want to sell."
At the heart of the market's worry is whether U.S. leaders can come to agreement on some $600 billion in spending cuts and tax increases that are due to kick in early next year. Some fear dramatic cutbacks could send the U.S. economy into another recession.
The prospect of higher tax rates in 2013 is driving investors to sell shares as they seek to lessen the tax impact from their positions this year and next. The primary driver of stock prices in coming weeks looks likely to be investor concern about the U.S. fiscal situation.-- Reuters