The market looks like it just put in a near term low on Friday as the bulls showed up and defended the longer-term 200 DMA line. In the last two weeks, the market erased the last 10-week’s of gains. That, ladies and gentlemen, is not an insignificant sum and should not be taken lightly. Clearly, that is not aunt Jane and uncle Joe selling, it’s the big institutions. The market went from egregiously overbought to egregiously oversold in a few trading days. The vehemence of this sell-off is worrisome because we are still in a bull market. Imagine, what will happen when we enter a bear market. Stepping back, from a longer-term point of view, a nice steep correction would do wonders to restore the health of this very strong unabated bull run, it is way overdue. History shows us that 80% of corrections do not turn into bear markets and 20% do. So, if this one turns into a bear market, then we will adjust and be ready. History also shows us that markets do not top out overnight, instead tops take time to form. For now, we know the overtly strong bull market has cracked and the crazy “buy at any price” mentality is gone. That may come back, but for now, patience is paramount.
Thur & Fri Action:
The Dow plunged 1,000 points on Thursday as sellers aggressively sold stocks all day. To help allay any concerns about the Fed tightening too fast, Chicago Fed President Charles Evans said that the Fed will not raise rates before mid-2018. Interestingly, stocks are falling as earnings continue to be strong. Of the S&P 500 companies that had reported close to 80% had announced better-than-expected earnings which sets the stage for a strong 2018. On Friday, the market opened higher, fell hard, then reversed and closed higher after the bulls showed up and defended the longer-term 200 DMA line. As long as Friday’s lows hold, Friday appears to be a near term low.
Market Outlook: Market Correcting
The market is pulling back and the bulls are trying to defend the longer-term 200 DMA line. For now, as long as that level holds, the longer-term uptrend remains intact. As always, keep your losses small and never argue with the tape. Hit A Wall? Not Sure What To Do In The Market? We Can Help. Don’t Go It Alone, Learn More Here…