Home About Archives RSS Feed

@theMarket: Easter Bunny Bounce

By Bill Schmick
iBerkshires Staff

This holiday-shortened week saw a relief rally that began on Monday and carried through until Thursday. The markets still have further to go in the coming week before we once again reach the top of this four month long trading range.

The question that haunts both bulls and bears is when and in what direction will the markets finally break out or break down? As readers are aware, I believe that there is a high probability that stocks will do both in the weeks ahead. We could easily see the S&P 500 Index, for example, reach a new high, possibly 1,900 or beyond.

However, at some point this spring, that index and others will rollover. The resulting decline will be nasty, scary and absolutely meaningless in terms of this 2014's full-year returns. But the trading range will be broken on the downside, as a result. How bad could it get?

Let’s say the S&P 500 Index begins to rollover at 1,900. A 10 percent decline (190 points) would put the average at 1,710. A 15 percent sell-off would equal 1,615. That would simply put us back to the levels we enjoyed in October of last year.

Readers may recall that back then the Fed was still talking about tapering, although it wouldn't be until January that the Fed would begin to cut back on stimulus. Market commentators were warning that the market was overheated and due for a big pullback. Investors earlier that month were concerned that the government would be shut down (it was) and we would default on our debt. Job gains were modest at best and the strength of the economy was a question mark. Pimco's Bill Gross was writing that all risk assets were priced artificially high.

The point of this recent history in hindsight is that dropping 15 percent would only return us to a level where investors thought the markets were too high anyway. Since then, of course, many changes have occurred and all of them positive. Employment and the economy are showing great gains. Corporate earnings have increased. The political stalemate in Washington has at least quieted down. And the Fed has begun to taper but, contrary to popular opinion, interest rates have not sky rocketed.

Times change, however, since then we have risen almost 20 percent in six months. Seasonally we are not in October, but moving instead into spring. That is usually a down period in the markets (sell in May and go away) compounded this year by the mid-term election cycle (also a bad time for markets historically). We have not had a 10 percent correction in over two years — a market anomaly. Bottom line: we are set up for a pullback, but exactly when it occurs is a question no one can answer with any accuracy.

So far, the markets are following my playbook practically page by page. Stocks bounced off their lows on Friday and started this week in rally mood. The technology-heavy NASDAQ led the charge upward with the other averages following. At its low, NASDAQ had dropped almost 10 percent.

The last two weeks of April have been pretty good for the markets historically. All the tax selling is now out of the way and investors are re-establishing positions in various stocks. Chances are that we should re-test the recent highs and do so quickly. Hold on to your hats.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

0 Comments
     
News Headlines
North Adams Happenings: Aug. 16-22
Lanesborough Undecided On Appointing Emergency Management Director
Adams & Cheshire School Bus Route 2017
North Adams Committee Recommends Resolution on Climate Accord
Letter: Ways to Protest Safely
Williamstown Con Comm OKs Culvert Replacement
SteepleCats' Whitney Named All-NECBL
Here are 6 tips on how to reduce your home heating bills this winter
Williamstown Weighs Timing of Vote on Retail Pot Ban
North Adams Planners OK Porches Inn Structure

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (235)
Independent Investor (320)
Archives:
July 2017 (2)
June 2017 (8)
May 2017 (7)
April 2017 (7)
March 2017 (8)
February 2017 (8)
January 2017 (6)
December 2016 (2)
October 2016 (1)
September 2016 (9)
August 2016 (3)
Tags:
Recession Congress Metals Housing Energy Selloff Banks Election Bailout Deficit Pullback Economy Stock Market Currency Greece Europe Euro Interest Rates Europe Oil Markets Retirement Japan Stimulus Stocks Rally Debt Crisis Federal Reserve Debt Ceiling Commodities Fiscal Cliff Wall Street Jobs Taxes
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
@themarket: Global Interest Rates Rise, Global Stocks Fall
The Independent Investor: The Market's Half-Time Report
The Independent Investor: Small Business Linchpin of America's Success
The Independent Investor: A Tale of Two Charities
@theMarket: Markets in Pullback Mode
The Independent Investor: A Tale of Two Charities
@theMarket: FOMO Fuels the Markets
The Independent Investor: The Client Comes First
@theMarket: Markets Still on a Roll
The Independent Investor: Elder Care in an Age of Confusion