Well, the market decided to keep up with the Christmas tradition and not take a big dive before year end, but only just. This thing was headed south in a big hurry until The Federal Reserve made an announcement about not rushing to raise interest rates.
Here’s why I think this market is soon to be lost…
Here’s the long term chart of the S+P 500 (blue line is the average price for last 200 days):
Clearly, this market is still in an uptrend, and because of that there’s no way I’d be shorting it. But it’s evidently a very news-driven market, case in point this last week. It’s behaving like a penny stock with all this wide and loose price action. Cratering one minute and soaring up the next, bouncing from one rumor to the next.
A market that’s so sensitive to news tells me one thing: this is a very uncertain and jittery market that’s looking for direction, and that usually signals the end of a bull cycle. Moving forward, I expect this market to react heavily to one ‘shock’ or another. It’s going to get bumpy.
Let me show you how quickly things can change:
That chart above looks very healthy, right? Here’s what happened next in 1987:
I can’t say how and when exactly this up cycle will end, but these violent moves in both directions feel more and more like the death throes of a stubborn old bull; they are not becoming of the elegant and steady climb that its younger counterpart enjoys.
Have a wonderful Xmas and I’ll speak to you next week.
Best
Jim.
The author has an interest in the securities discussed in this article. Source of charts: stockcharts.com
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