We have been hearing a lot about the divergences in the major US stock indices. The lagging small caps, the lagging Nasdaq, and the lower bond yields. The right word for the average investor right now is cautiously complacent. It is not total ignorance of risk, but also not a fear of something bad happening. It seems like most are waiting for a small correction to buy the dip. Which means it is likely that they are already underinvested, or gasp, even short this market.
I would really be surprised if we got below 1850. And the SPX only gets down to 1850 if there is some bad news headline. Without any news, I doubt you see anything below 1860. So the lower bound for the next couple weeks is 1850-1860, and the upper bound is probably around 1920. If we get to 1860, I will be looking to buy. At 1850, I will be more aggressive with the buys.
So at the moment, the best approach is to wait for a dip. And buy it. It has been working for five years. If there is no dip, no harm done and wait for the next opportunity.
On the bonds, it looks like the market has stabilized and there is strong resistance at 2.47% on the 10 year yields. So we should trade in a tight range from 2.47 to 2.55 for the next several days. There was a burst of volume last Thursday and it looks like a mini buying climax. However, I'm still long bonds, as I expect the downtrend in yields to continue for quite a while. Bonds right now are a supertanker on cruise control, the momentum will carry it forward longer than most expect.
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2 comments:
1865 looked like bottom for now.
Yes, it looks like we're not going to go down much at all. Very resilient market.
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