Markets Are Forecasting Another Recession
The sellers are clearly in control as stocks, currencies and a slew of commodities plunged across the globe last week. The selling finally spilled over to the major U.S. indices, sending them below very important support levels that we have highlighted repeatedly over the past few months (2,040 in the S&P 500). In a “normal” (non Easy Money) world, we would say without a shadow of a doubt that the market formed a major top over the past six months and we are now headed into a steep correction, if not worse. The major wild card remains the Fed and other central banks. The Fed still has rates at zero and we believe they stand ready to embark on another round of QE (printing money) if conditions worsen. Remember, the Fed has put on the perfect hedge by saying they are data dependent: If the data improves it gives them the option to raise rates and if the data deteriorates (present situation) they can easily justify another round of QE. The problem is that even with rates at zero and other central banks printing money, global economic demand remains lackluster at best. So the Fed’s conundrum is that Main Street is barely growing, even with rates at zero. At this point, markets around the world are clearly forecasting another global recession and notwithinstanding more Fed easing, the path of least resistance is lower for stocks. Defense is king until the S&P 500 trades above 2040.
Monday-Wednesday’s Action: Sellers Are In Control
Thursday-Friday’s Action: Stocks Plunge Below Important Support
Market Outlook: A Major Top?
Every bull market in history has a definitive beginning and an end. It is important to note that with each day that passes, we are getting closer to the end and further away from the beginning. This bull market is aging by any normal definition and celebrated its 6th anniversary in March 2015. The last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007. As always, keep your losses small and never argue with the tape. If you want exact entry and exit points in leading stocks, or access more of Adam’s commentary/thoughts on the market. Join FindLeadingStocks.com.