Market Misery Persists and There's No Telling How Low We Can Go
A combination of economic uncertainty and terrible technical action means it's necessary to play defense.
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Market misery continued on Thursday as tariffs and economic uncertainty kept buyers on the sidelines. The Magnificent Seven MAGS led to the downside with a drop of 2.8%.
The S&P 500 was down about 1.5%, which pushed it firmly into a technical correction, which is a drop of 10% from recent highs. Breadth was poor, with 2,400 gainers to 7,350 losers.
There is a long list of ugliness out there, but the big question is: How much longer will this last? Unfortunately, there doesn’t seem to be anyone riding to the rescue. The tariff issue is still a mess and is changing daily, and some positive news on inflation doesn’t matter at all. Talk about a recession is picking up steam, but the Trump administration is confident that its economic policies will start to kick in and the pain will be forgotten.
On top of the negative and uncertain news flow is terrible technical action. Even if you are bullish, the price action is so poor that it is necessary to take some defensive action to protect capital. There is no way to know how low we will go.
The selling on Thursday was so steady, and the mood was so sour, that it had the feel of early capitulation, but we still don’t have enough extreme selling to produce a snapback.
I’d like to tell you that we are close to a major low, but there isn’t anything yet to indicate whether that is the case. Charts still need to find support, and there are no signs of the type of panic that produces a washout.
Stay patient, and don’t be in a rush to put precious capital at risk.
On Friday morning, we will see the Michigan sentiment numbers, which are unlikely to be very positive.
Have a good evening. I’ll see you tomorrow.
