My worst flaw as an investor–at least, the worst that I’m aware of–is that I’m too bullish. So I have to be careful at a time like this when the stock market has been on a downtrend, to ensure that I don’t call a tactical bottom too early.
I should also point out that mutual funds have most likely been out of the market for the past few days, so the wicked intraday spikes we’ve been seeing in recent trading are more likely the work of algorithms than humans. So the end of the mutual fund fiscal year is in itself no reason for these swings to stop.
Still, it looks to me as if the lows the market established early in 2018 are holding. Also, many tech stocks, having lost a third of their value, are beginning to move up on what seems to me to be the flimsiest of positive news–a so-so earnings report or an upgrade by a brokerage house analyst.
So my guess is that the worst is over and that stocks will go sideways to up from here.
Several things to note:
–intraday swings have been unusually large, based on past instances of correction. This may just be what machine-driven markets look like
–a change in market leadership often occurs after a correction. I’m not sure what that would be in this case. I’m still thinking that IT will lead, noting, though, that chip manufacturing businesses appear to be entering one of their periodic phases of oversupply (driven by the fact that capacity is added in huge chunks, and usually by everyone at the same time)
–the long-term economic negatives recently created by Washington–large-scale deficit spending; emphasis on reviving older, inefficient industries; policy directed at breaking down global supply chains–haven’t gone away. The considerable social/cultural damage being done by the administration hasn’t, either. At some point, these factors will begin to retard stock market progress, although they may be issues for 2019.
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