Unlike the quick sharp dips that we saw in January, March, May, June, July, and August, this one has been slow and steady. The selloff has been sneaking up on investors, a 30 point drop here, a gap up there, and a 40 point drop from that, etc. It hasn't put any real fear into investors, and it seems like almost no one is getting scared out of the market. Finally at the close on Friday, and intraday Monday, you did get a little bit of fear, but nothing that is a reliable bottom signal. I looked at the put/call ratios for Monday and they were lower than Friday's, so very little fear in the options market.
The market hates uncertainty, and with the US government taking center stage in the coming weeks, with the debt ceiling, budget deadline on Sep. 30, and still nothing imminent from the infrastructure bill, tax hike talk, etc., you have the catalyst for further selling. These aren't big events, but they are things that make investors a little bit uncomfortable, especially if the SPX is downtrending during that time.
Although I do hear calls for a 10% correction, and that we're due, I look at the fund flows and options volume and people seem to be saying one thing and doing another. It seems like mostly fully invested correction callers.
The big picture remains intact and it will take a big drop for that to change (SPX to 4200) that. I just expect about 2 more weeks of volatility, and then probably the all clear for the Q4 rally. Very few investors have gotten shaken out this year because the uptrend has been so steady, but the market has gone up so much already, it probably just need to consolidate a bit before the parabolic run up for the final blow off top.
Treasuries have been trading quite weak considering the weakness in equities. It could be the Fed taper jitters are weighing on the bond market more so than the stock market. It seems like stocks are more concerned about the future of fiscal policy than monetary policy, which has been well telegraphed. Everyone knows Fed taper is coming, so I don't expect the Fed to be a big market move for the rest of the year.
Still expecting a pullback down to around the SPX 4400 area, where I would buy for a long term trade.
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33% inflation in car prices. 25% inflation in groceries. 25% inflation in wages for new jobs (employers won't raise as much for people in existing roles). 33% inflation in rents.
Why are gold prices stagnant?
because gold prices went up %38 since 2018 - inflation is priced in
Gold prices went up a lot in 2020, and it has been more correlated with bond yields than with inflation data. Weaker bonds have actually been a negative for gold since 2011, even though higher inflation is bad for bonds.
We are about one rip roar session away from new highs. This pullback is hilarious.
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