Its the summer. We should be in a seasonal bear market. Sell in May exists for a reason, summer is normally prone for a sharp slump.
As such it seems a bit obvious to warn of a nasty dip.
However when prices are high dips can be even worse than usual.
A lot of grumpy old men are very uncomfortable with current high stock prices and many look to a rise in interest rates to spark a correction or crash.
I feel we could crash or bubblew. I do not think a normal market of neatly rising stocks is the most likely path.
I’m risk off but not as deeply in cash as in the past. I don’t have the temperament to sit on the sidelines and wait for the end of the world. I prefer to play the bigger fool game for now.
However the dow is in a bad place technically. It is clearly stuck. Since March the market has been bogged down and going nowhere.
Rest is not an option for markets. They go up or down or thrash around, they don’t go to sleep. As such this congestion is ominous.
The same at the SP500
The bullish upwards trend is anemic
Only the Nasdaq looks strong.
The Dow and SP500 congestion is narrowly bounded so it is a tight single for risk on or risk off thinking.
Just looking at the Chinese stock market which has bubbled in a period of tough economic times is enough to warn us all that markets aren’t fated to flop even in difficult financial periods.
Greek exits will roil the markets, interest rates will rise, the dollar will be too strong. There are many triggers for a correction. Yet time and again it takes a true crash like 2007/2008 and 2000 to really have much inpact on a good portfolio There is however no reason to be complacent.
The current stock markets of the US and Europe are drive by government policy and these policies are at a turning point.
In such potential volatile times you have to be more wary than usual and consider more what-ifs than usual.
Like it or not, equities are expensive and that brings with it a fragility that one days turns into the sort of markert rout suffered in China this week.
It maybe a long way off but don’t bank on it.