I don't normally talk about the general market, but what a wild two weeks! The S&P 500 peaked at 2,873 on Friday, January 26th and dropped 12% to 2,533 on Friday, February 9th. By comparison, the initial plunge during the 2015-16 bear market, in August of 2015, was 11% over just five days – culminating on August 24th “Black Monday.” The chart shows (hopefully) that interest rates have not caused this market correction (the price of TLT moves in the opposite direction of the interest rate on the underlying bonds). While increasing rates did portend (not cause) the 2015-16 bear, the late-2016 increase in long term rates had no affect on the ensuring 2017-18 bull run. The iShares 20+ Year Treasury Bond ETF (TLT) is trading today, right where it was in late-2016. Today we have none of the future economic uncertainty that is typically tied to major changes in the market. In fact, S&P 500 companies are currently beating earnings estimates at the highest rate since 2009.
The previous correction (8/15/2016 to 11/04/2016) was only 5%, but it was three months long! This one is 12% so far, but only two weeks long – again, so far. I never try to guess what the market is going to do in the future, but I highly doubt that this correction will be nearly as long, as this bull market’s first correction. Elliott Wave’rs call this “alteration” but it seems to have merit across many technical disciplines. Just remember, lightening actually does strike twice! Thanks for reading -- Roy
The previous correction (8/15/2016 to 11/04/2016) was only 5%, but it was three months long! This one is 12% so far, but only two weeks long – again, so far. I never try to guess what the market is going to do in the future, but I highly doubt that this correction will be nearly as long, as this bull market’s first correction. Elliott Wave’rs call this “alteration” but it seems to have merit across many technical disciplines. Just remember, lightening actually does strike twice! Thanks for reading -- Roy
Comment:
Just a quick update - the SPX now has three straight closes (2/12, 2/13, 2/14) above the 100-day moving average (2,645). Not shown on this chart, but the 10-day RSI is currently 47, which is lower than either of the two bounces during the 2015-16 bear (54 and 53).