People Are Asking, Is The Correction Over, Is The Bottom Set?
$SPY
The S&P 500 gained 2.5% Tuesday, helping investors forget about the big drop that happened in August, and then what happened? It lost 1.39% on Wednesday finishing on the lows.
The Big Q’s: was the 11% down move in over, was it a correction, is the bottom in.
The Big A: many believe the answers are all Yes, and that stocks should be headed to new highs on the next leg North
The fact is nothing has ended, as there was no correction, and nothing was corrected. The market is trading in a very volatile, toppy manner.
Why, well because US monetary and fiscal policies are remain unsettled, just as they were last month.
US Fed officials have not raised interest rates or even has a meeting and decided not to raise rates, that is next week.
US Government officials have not passed a budget for next year or even held a meeting to share what they are thinking about for a budget, that’s a ways from here.
Corporate earnings have not changed in the past month. The only real difference is that estimates for Y 2016 earnings provided by Standard & Poor’s are lower than they were in August.
Friends, all of the above looks more Bearish than Bullish to me.
The economic news is stagnant.
Unemployment dropped to 5.1% after 173,000 jobs were added in August. Of course unemployment probably would have gone way up if it had not been for the 261,000 people who left the work force in August and gave up looking for work or choosing to work.
That is good news for the unemployment number, but fewer workers is not good news for economic growth. But, hey for market Bulls that is a long-term problem and and participants seem to be focused on the short term only, aka the Headline-term
That said, there is no reason to expect stocks to reach new highs anytime soon, and there is no reason to believe the/a correction or the/a Bear market has finished.
| HeffX-LTN Analysis for SPY: | Overall | Short | Intermediate | Long |
| Bearish (-0.44) | Very Bearish (-0.54) | Bearish (-0.40) | Bearish (-0.37) |
Stay tuned…
HeffX-LTN
Paul Ebeling
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