Here's My Game Plan as the Market Struggles With 4 Big Negatives
Adding to difficulties, there is now a negative response to several earnings reports.
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The uncertainty of tariffs continues to loom over the market as it contends with economic issues, poor technical conditions, and weak earnings reports.
The market made a brief attempt at a recovery following Fed Chair Jerome Powell’s comments on Wednesday, but it never gained much momentum and fizzled out on Thursday. While Powell offered some optimism about the economy, his primary message was that there is an extremely high level of uncertainty along with increased risks of sticky inflation, higher unemployment, and slowing growth.
To add to the difficulty, there is a negative response to earnings from FedEx FDX, Nike NKE, and Lennar LEN. All three reports reflect weak spending and slower economic activity.
Unfortunately, there is unlikely to be increased economic certainty in the near term. Major tariffs are scheduled to go into effect on April 2, although there are ongoing negotiations that will greatly impact the ultimate design. Economists are anticipating a worst-case scenario even though there appear to be some positive developments in the negotiations.
The uncertainty and negative news flow has created poor technical conditions. The S&P 500 briefly fell into correction territory on Thursday, March 13, and has bounced back up over the past week, but it never made it to its 200-day simple moving average, and it is now in a low-level trading range. The biggest positive is that there is technical support at the March 13 lows, but there isn’t enough positive momentum to test upside resistance.
Under the surface, the Magnificent Seven MAGS names continue to lag badly. For much of the last few years, these names have been a safe harbor for investors because of their relative strength. While that is no longer the case, there isn’t any replacement for this group that did so much to drive the indexes.
My game plan is to manage my positions closely and be ready to sell partial positions if support levels weaken further. While there are interesting values developing, the price action is very poor, and there is no compelling reason to buy at this point.
It is a very tough market environment and is likely to stay that way as we await clarity on tariffs. The best course of action is patience and plenty of cash.
At the time of publication, Rev Shark had no positions in any securities mentioned.
