Here we are, right back in the midst of another sharp pull back. Throughout the move from the lows in March 2009 to the recent record highs in 2019, there have been countless pullbacks like the one we are currently in.
And each of these pullbacks always have similar characteristics... a named excuse for the pull back, and the bears emerging from their caves calling this the top. Lots of chest thumping. Lots of criticism of the FED. Growth concern headlines....I could go on...
And each time, the market finds a bottom, recovers, and then rallies to fresh record highs.
This latest pullback is has more than enough named excuses, but the trigger was the ISM number before the bell on Tuesday. The recession is closer than ever. Perhaps its already here?
Either way the road is paved with more QE and lower interest rates, which means....drumroll... new record highs for the market. Go figure. Those bears who thought QE1 QE2 and QE3 were bad for the market think this looming fresh round of QE and lower interest rates are going to be bad for the market too. Hmmm....
The current pull back, after that $SPY $294 break opened the door for a possible re-test of channel support at $282.
Whether we get there or not is up for debate, however I suspect we will have our answer over the next few trading days. From there I think, we will get a sharp reversal and new record highs.
And we have our VIX spiking higher during this most recent pullback. Have we seen the highs yet? or is 23-25 coming first before a melt back down under 15?
I wish I knew the exact answer to when this market will bottom. But I do know that QE and low interest rates are bullish for this market, despite the fact that they imply a weak economy. The market is forward looking and when QE and lower interest rates start fueling the next growth spurt for the economy prices for the stock market will have already risen some 6 months in advance of that, which means growth in April of 2020 is going to start getting priced in now....