What Happened to the Stock Market Melt Up?

700+ points of Dow decline on Thursday surely did change sentiment quickly. And while stock market bottoms do occur on Fridays (13% of the time), contrary to popular belief, the final low is unlikely to be today. Earlier this week, I discussed how all three of my offered scenarios were breaking down as they all eventually do, I thought the Dow would go check out 24,200 but likely head all the way down towards 23,000 which is below the lows from February. However, I do not believe the other major indices will all exceed their February lows, which creates a non confirmation or divergence.

Sector-wise, semis and banks look the healthiest of the four key ones with transports and discretionary trying to hang on. I am most concerned about the consumer. Defensive stocks have been battered and bludgeoned as much as cyclical ones. And bonds aren’t really offering that safe haven.

As I mentioned on Fox Business yesterday and something I will be writing about for the next two plus years, tariffs are awful economically. No one wins in a trade war. The Fed is raising rates AND selling assets at the same time as the Treasury needs to borrow more money. This is not a good combination and will end poorly if not changed.

Before you out and buy bottled water and canned goods, I still forecast fresh all-time highs in the Dow coming by summer. Sure, I could always be wrong, but the evidence doesn’t support recession and a bear market just yet. That time will come.

Remember when the only talk was about a stock market melt up?!?!

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Comments

  1. Marc J Mosqueda says:

    Nice commentary Paul and have learned a lot since the Obama Presidential Cycle living and growing up near The Merchantil Exchange in Chicago. Gary, Indiana is Steel City and Whiting Indiana is nothing but crude oil. I grew up as a kid working at Greek Restaurants along with paying my way through college at Strack & VanTil Grocery store. Industrial Growth took a big hit since the Reagan Presidential Cycle and now Retail is just feeling the effects from my view and research. I am 56 years old and signed up for the draft to pay off my first student loan. I am an Illinois & Indiana Funeral Director/Embalmer along with an Electronic Day Trader. I experienced being broke for the first time during the Obama Administration and agree with you that Ben Bernanke saved us from the financial crises. Can it get any worse? All I know it is in President Trump’s court now during NCAA March Madness. It feels worse than 1970 during the Vietnam Era of this great country living in Lake County Indiana.

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