Just a quick update- it looks like the Market might finally be capitulating to the reality of the COVID Re-Opening Consequences. The Market has been extremely resilient to bad news over the past 8 weeks, but today’s action looks detrimental.
I don’t know if this pullback will hold but I’d like to see further deterioration so that I can put my cash reserves to work. [ Listen to a previous podcast where I discussed buying the dip to re-balance during a COVID recovery: https://www.wealthsteading.com/311 ]
Stay tuned…I plan to release more detailed analysis over the weekend.
The S&P 500 has recovered to the previous highs of November 2019. I’m concerned there might be a little too much re-opening exuberance right now.
So to lock in some profits, I sold the following positions:
BOTZ Global X Robotics & Artificial Intelligence ETF
HACK Cyber Security ETF
RYT S&P 500 Equal Weight Technology ETF
UNH United Health Group
XSD Semiconductor ETF
YUMC Yum China
I’m not worried about a catastrophic meltdown, but I am concerned the market has risen too fast and is ignoring some major uncertainties. Namely: Unemployment, China tensions, and the November Election. You can listen to a brief 10 minute podcast explanation here:
Has the seven week Relief Rally morphed into a Sucker’s Rally? I hope so. I’ve been waiting for another buying opportunity.
Today the S&P 500 was down 1.75%, not as bad as yesterday’s 2.05%; and unlike yesterday’s horrible close, today the index improved during the final minutes of trade.
But things don’t look good. Over the past three weeks the S&P 500 has been unable to retrace the April high, nor has it been able to get closer than 2% of its 200dma. Today it also broke below its 20dma.
If the S&P 500 doesn’t find support at its 50dma (~2700) then it’s likely to drop to at least 2600. At that point, it would even be probable that it could drop down to test the March 23 low (~2200).
For long term investors, a drop to or below the 50dma would present an excellent buying opportunity. As always, the exact bottom will be elusive and fruitless to try to pinpoint.
The S&P 500 has been faltering for the past three sessions and is back near mid-April levels. For now it’s range bound between the upper 200 day moving average and the lower 50dma. Flip a coin to determine if the market will breakout or breakdown from here.
Here’s my assessment of the current situation:
Second Wave of outbreaks as economies reopen
Declining corporate earnings
Depression level unemployment
Points blame at China and increases rhetoric about tariffs, reparations, and economic de-linking.
Investors develop amnesia about recent Stimulus intervention and demand more SPENDING.
What I find interesting is that today’s levels are similar to the peaks seen in Jan 2018, Sep 2018 & Jun 2019. Back then the FEAR was Trade War, Tariffs, Impeachment…ultimately none of that static mattered and the Market went on to set new record highs.
I remain cynically hopeful for another dip, to be used as a long term buying opportunity.
FYI- watch for the next episode of the Wealthsteading Podcast, #312 will be informative & FUN !!!