“When a stock market has a mini-crash like the one we just witnessed, stocks typically return to the scene of the crash one more time before moving on.”
That was a quote from last month’s Newsletter, and it remains relevant. Since the February 9th crash low of S&P 2,533, the U.S. stock market has had a whole lotta shakin’ goin’ on. Volatility is riding tall in the saddle through Wall Street as large swings are not just a daily but an hourly occurrence.
This is an abrupt turnaround from 2017, when the market seemed to be riding on a seemingly never-ending magic carpet ride of dazzling gains.
In times like these everyone wants an explanation of exactly what happened to their gains, and who they should blame. Tariffs, trade wars, interest rate hikes, Russia, Russia, Russia. We’ve heard them all. Our guess is it was just time- in fact about three years overdue- for a correction, and the market was just itching to find an excuse. But rather than make futile attempts to explain this two month rout, we will spend our time focused on managing risk and search for early opportunities that should emerge once this dizzying market turbulence subsides.
The key areas we are watching to know which way we are heading next remain the same from last month. The S&P needs to hold above the 2,510 to 2,530 area in April to get us interested in dipping a toe, and above the 2,670 to 2,695 area to dip a big toe. If on the other hand the S&P decides to break below the all-important 2,510 mark we may be in for another mini-crash, which will require a whole new round of rehab to allow stocks to heal, translated- more time. In the meantime expect volatility to be April’s flavor of the month with more noisy headlines and a whole lotta shakin’.
“I said shake, baby, shake
I said shake it, baby, shake it
And then shake, baby, shake
Come on over, whole lotta shakin’ goin’ on.”
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