Earlier in the month I suggested that we would likely hit a soft patch in Q2 and projected that the markets would remain weak through most of May. However, given the risk of recession remains a remote possibility, any pullback in the markets would serve as a buying opportunity. I believe the U.S. economy is still on a growth trajectory and if an economically weak Europe can re-energize in the second half, then the markets should head higher with cyclical sectors leading the charge.
Here’s what’s going on with the markets, in my honest opinion. It’s a bull market in stocks, according to both the Dow Theory and the PTI, and has been since mid-2009.
If you were watching your trading screen today at about noon central you got a hell of a surprise when the market suddenly collapsed on huge volume, with the S&P futures dropping from 1573 to 1558 in seconds and then recovering over the next five minutes or so all of the loss.
One of the apparent conundrums of US Fed money printing in the current cycle is lack of headline inflation, at least as measured by the CPI. Certainly the CPI calculation itself is open to debate in terms of whether it is accurately depicting the cost of living in the US.