And there ya have it folks. That bull trap set from the start of 2019 has finally sprung. Those failing to heed the relentless warnings have seen their gains of over 20% collapse to only 15% for the year. The bears nailed it again.
Perhaps this latest pull back from record highs is the long awaited top. Perhaps the Met's will avoid tearing the heart out of their faithful fans this year..
There is no telling for certain what will happen down the road. However since 2009 saying higher prices and new record highs are coming has been right 100% of the time. Sure... on a long enough timeline the bears will finally get it right... but when? And just how much more upside will they warn us not to participate in? If avoiding 15%+ of gains for 6 months is #winning.... call me a loser.
While the market encounters a nasty bout of volatility that the bears successfully called back in February, I think this is another round of tree shaking, trying to scare longs out of their positions.
The record highs of just a few weeks ago were not met with celebration. Most are wondering when this bull market will finally come to an end. There remains plenty of excuses to sell. You could argue we are at peak excuses to sell. A top in excuses to sell you say?
I've been saying for years that when we see the market pull back amid a back drop where no excuses to sell exist, that very well may be the long awaited top.
All these excuses are leading to the the one thing that has fueled this stock market since the lows in 2009. Central Bank assistance. We are seeing odds for more rate cuts increasing every day.
Right now the market is favoring at least two more rate cuts by years and... however the odds for three cuts before 2020 are increasing as well.
Low interest rates for longer? Cheap money to keep the massive record debt serviceable for longer? More share buybacks?
Lower stock prices give all these corporate sharebuyback machines the opportunity to be buying back their stock at lower prices. Its more sharebuyback bang for the buck!
With that being said I think when this most recent spat of volatility and selling ends, the market will embark on yet another rally to record highs.
I do, however,think a test of $SPY $276.50 could be in the offing. At that point I will look for momentum to shift and until we get that momentum shift, trading for upside will be a high risk proposition.
When I say 'wait for it' I am implying a wait for that momentum shift.
.. and when it comes we could be looking at the next big bull trap to record highs....