A Break from the Melt-Up - Finally!
So we finally get a break from the Melt-Up in stocks. First, after yet another week of all-time highs, stocks turned sour on Friday. Then, today, a big drop. The explanation: the coronavirus. There's fear in the air. No one's sure how far this nasty virus has spread and, likely, will spread. It's a killer - more so than your typical virus. Hence the fear.
Not to minimize the seriousness of the situation, the fact is, when it comes to stocks, we could consider the coronavirus the proximate trigger that set off a correction long overdue in stocks. There's been a lot of negative divergence between the price of the Dow, S&P, and NASDAQ and many other indicators. Such divergence typically screams: "Correction coming!" But with a Melt-Up in place, what typically would have happened in a more normal market simply hasn't happened - until now.
How to react? Well, besides noting what's going on, there's really not much to do. If you've been thinking of adding stock exposure because you've been light so far during the Melt-Up in stock prices, you could consider this a buying opportunity.
Now, to be frank, that's not necessarily the wise approach. Given how much the Fed's QE, Reverse QE, then, recently, resumed QE has distorted the venerable "price discovery" function that markets traditionally provide, it's hard to say what seems obvious with any conviction. But it wouldn't be crazy to say it and even take action.
Where do we go from here? Likely, what was overbought will become oversold. At that point, stocks will have taken their rest and - one might reasonably assume - resume their Melt-Up action. When will we arrive at that point? Could be anytime really. Today? It's certainly possible, but it would not be surprising if prices declined further or at least consolidated at the bottom.
We might remind ourselves that a real correction - one with any backbone - should be somewhere in the 5% - 10% range, not the measly 1.5% we've got at around 10:15 AM this morning.
Ah, looks like things are heading farther south as we speak.
OK. Time to just go about our regularly scheduled business with a curious eye on how things unfold today.
Not to minimize the seriousness of the situation, the fact is, when it comes to stocks, we could consider the coronavirus the proximate trigger that set off a correction long overdue in stocks. There's been a lot of negative divergence between the price of the Dow, S&P, and NASDAQ and many other indicators. Such divergence typically screams: "Correction coming!" But with a Melt-Up in place, what typically would have happened in a more normal market simply hasn't happened - until now.
How to react? Well, besides noting what's going on, there's really not much to do. If you've been thinking of adding stock exposure because you've been light so far during the Melt-Up in stock prices, you could consider this a buying opportunity.
Now, to be frank, that's not necessarily the wise approach. Given how much the Fed's QE, Reverse QE, then, recently, resumed QE has distorted the venerable "price discovery" function that markets traditionally provide, it's hard to say what seems obvious with any conviction. But it wouldn't be crazy to say it and even take action.
Where do we go from here? Likely, what was overbought will become oversold. At that point, stocks will have taken their rest and - one might reasonably assume - resume their Melt-Up action. When will we arrive at that point? Could be anytime really. Today? It's certainly possible, but it would not be surprising if prices declined further or at least consolidated at the bottom.
We might remind ourselves that a real correction - one with any backbone - should be somewhere in the 5% - 10% range, not the measly 1.5% we've got at around 10:15 AM this morning.
Ah, looks like things are heading farther south as we speak.
OK. Time to just go about our regularly scheduled business with a curious eye on how things unfold today.
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