Bears Get Their Opportunity as Trading Range Continues

I published a new video yesterday with three main topics. Our model’s view of the stock market. Warren Buffet and Berkshire’s underperformance. Why the stock market has been rallying with the economy in a tailspin.

As you know, my theme has been that stocks are in a trading range bound by Dow 25,000 and 22,000. I continue to believe that is the case. That translates well into the S&P 500, S&P 400 and Russell 2000 too. Just to change it up you can see the S&P 500 below.

Only the NASDAQ 100 is trading with a mind of its own as the masses pour into technology growth stocks that have the best chance of success during the crisis. If and when the market visits the lower end of the range I would fully expect the tech sector to decline significantly right before stocks bottom.

The deeper this pullback goes, the more calls I expect to hear about either stocks revisiting their March 23rd lows or breaking well beneath them. I said it in real time on March 22nd and several times since; the March bottom was significant and we saw a number of thrusts off that low to suggest a new bull leg beginning. I, however, did not see the magnitude of the rally being as great as it was.

The model for today would have the market forge its low for the day in the morning, preferably within the first hour. Seeing green during the day is what is supposed to happen although pre-market action is showing a loss of 1% early on. Stocks ending sharply lower today would be out of character and signal full control again by the bears.

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Paul Schatz, President, Heritage Capital
Paul Schatz, President, Heritage Capital
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