Yesterday the S&P 500 managed to rally 1.01% following the nasty Monday in which the DOW fell over 430 points. That brought some worries among people that the market was on the verge of a final correction thanks to the coronavirus worries, but actually action in the China stock market ETF FXI before the open Tuesday suggested that a bounce was coming – and it did indeed come.
Now the US stock market may do fine today, but I do not think the market is set to now just soar to new highs and beyond. Look for the market to chop around at its recent lows now and even hit its 50-day moving average in the next few weeks. This is typical action for a pause or consolidation following the big run straight up the US stock market put on for the final eight weeks of 2019. The same is the case for the SPDR S&P 500 ETF Trust (NYSEARCA: SPY).
The 50-day moving average tends to act as a strong support level when a market is in as big of an uptrend as the S&P 500 has been in since October. The market hasn’t even fallen more than a single day since hitting a new intraday high last Friday. It’s just normal for momentum to fade for awhile in a market like this after the big December move.
The same thing is essentially happening in the gold market too now. The action in the bond market is what is really influencing the gold price now and not coronavirus news or international tensions such as those seen earlier this month between the Iranian government and the Trump administration.
Today the Federal Reserve is on deck for a FOMC meeting and news release on interest rates. Look for the Federal Reserve to make no change to rates today as it is on hold for the time being. However, Fed Fund futures are now pricing in an almost 75% chance of a rate cut before the end of this year. You can find that data at the CME website.
At the start of the year the odds were around 60%. So they have shifted by over 10% in a few weeks. A lot is going on in the markets.
I did an interview with Jim Goddard of www.howestreet.com about the situation and what sectors I think the best places to actually look to buy now in this interview posted on Youtube and above. If you are coming to this website for the first time then get on my free update list by clicking here.
-Mike
