Market Update 4/8/2018
Karl De Jesus
Right up to Friday, it looked like we would end a week with a good buffer to the 10% market top declines we have been seeing lately. Then President Trump hiked up his tariff rhetoric on China to a new level and Jerome Powell took some air out of the bull camp with his steady as she goes comments on raising rates. Just like that we are back down 9.3% from the top, which will only make the wait to the eventual market climax longer.
As an update to my Shades of 2000 analogy, here is latest chart comparison between our market and 2000’s.
We may be floundering around the -10% mark longer but it is still a pretty good correlation. By contrast, we are looking less and less like the second peak from major bear markets, which usually topped and precipitated steadily. The coming week will be critical to see if the -2.5% peak mentioned in Still On Script was that climax peak or not. My take is that it should be a good week. According to Thomson Reuters data, earnings should be pretty good, 17.7% growth for the S&P 500. It may take a while, but that should be just the ticket to provide a steady lift to the market. Once the market figures out that President Trump’s hiking tariffs are just his way to negotiate with China, things should settle down on that account.
Don’t forget, however, that this will just be a steady climb to this market’s climax and not a continuing grand move upward. There is a major bear market coming.