Monday, September 19, 2016

Market Review and Next Week

After a sharp decline on September 9th where Dow dropped almost 400 points, market went sideways last week. Although the net result was sideways action, extreme marker moves were witnessed. Monday opened negative and then markets rallied hard, while Tuesday saw a sharp sell-off.

As the week came to a close, the volatility and market range had reduced. In fact, market closed +0.5% for the week. Following chart shows gyrating market behavior of last week.

While SP500 and DJIA consolidated towards the bottom of the range, Nasdaq 100 powered to near all-time highs, primarily driven by Apple stock and the demand for the new iphone and Samsung issues. QQQ are now very close to all-time highs!

One thing that we have said many times on this blog is that the market trend determines how the market participants and investors react to headlines. This weekend there were many reasons to sell the market, ranging from bomb blast in NYC to other events in Syria (US and Russia tension). However, if we are in an uptrend all headlines will be interpreted in a positive manner and resolve to the upside.

According to Market Classification Model, stocks remain in an uptrend. And that's the reason why we have neither sold our stock positions nor are planning to sell them till the model turn south. At this point, it will take a sustained substantial decline to do so. However, past week's decline has created enough selling extreme without really damaging the internal structure, that one can treat it as a minor correction in an uptrend.

Next Week
In the coming week, there are many reasons stories that could move the market. Top two news events will be:

  1. Fed FOMC meeting
  2. Bank of Japan meeting
It's very interesting that Fed and BOJ announcements will come one day before Fall Equinox on Sept 22nd. 

Investment Actions
Staying long in stocks and ignoring news based market gyrations would be two of the most important things one can do. If the market declines, it will provide an even better buying opportunity. But it's possible that the market rallies for next 1-2 days, followed by a decline after Fed announcement, which is quickly reversed. 

In other words, there will be a lot of back and forth, and one should not get caught in such gyrations. Instead, its paramount to remain focused becaus ethat's how you can become successful in the long-term.

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  1. I want the market rally in the U.S. the next 1-2 days, and a bigger rally, not a bigger declining which could send it to the correctional zone temporary, not for real. I don't want the U.S. economy to be struggling for the next few months before restoring and recovering for real next year and into the future.

  2. Seems like the US economy is strong. Fundamentals are strong. Growth stocks (Nasdaq 100) are near all time highs. Internal strength across sectors is very impressive. Anecdotal evidence suggests hiring is getting very strong. In other words, the US economy is getting ready for impressive growth. And now Emerging Markets and Global Markets are also going to support this rise.


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