Home About Archives RSS Feed

@theMarket: Markets Enter the Danger Zone

By Bill SchmickiBerkshires columnist
It has been a bumpy week for stocks, and it could get worse if you believe the headlines of the financial press. The issue I see is that just about everyone is expecting a nasty period ahead for equities. That makes me somewhat bullish.
Calling short-term market moves in this environment is akin to fortune-telling. It is short on analysis, and long on my gut feelings. Granted, I too, have been warning folks that the September-October 2021 time period has been a seasonally difficult time for equities. My column last week addressed the possibility of a 5-10 percent correction, and what investors should do about it.
The media has now proclaimed that we are entering a "danger zone" for stocks, which stretches from today through the end of the month. Today, Friday, September 17, 2021, is also widely expected to be extremely volatile. It is a "quadruple witching" day when derivatives of stock index futures, stock index options, and single futures expire simultaneously. This event happens once every quarter on the third Friday of March, June, September, and December.
It is usually a big volume day in the markets. Individual stocks and indexes sometimes see large price swings during the day and into the last hour of trading. The media has everyone worked up that somehow the "danger zone," combined with "quadruple witching," spells doom for the markets. I beg to differ. While volatile, these events have proven to have little impact on the markets after the one-day expiration. Losses are usually recouped throughout the following days.
The contrarian in me also wonders how useful it is to worry about the next two weeks in the market. When everyone else is on one side of the boat, I tend to lean the other way. Headlines like "investors brace for more September volatility" just adds to the noise, and leaves little left to discount on the downside, at least for now.
What could move the markets higher? Well, we have another FOMC meeting coming up on Wednesday, September 22,2021. I expect the Fed will wait until November before pulling the trigger on tapering. That will cheer up most investors. There was also some good news on the economic front.
As most readers are aware, U.S. consumer spending is a massive part of the Gross Domestic Product of this country (about 70 percent).  Thanks to the pandemic, incomes were boosted by fiscal stimulus, while at the same time, spending was depressed amid the lockdowns. Economists believe that as a result, consumers' savings have accumulated to the tune of $2.4 trillion or more. That is a lot of firepower and leaves the typical consumer with a combination of extra cash and lower debt.
That thesis came home to roost this week. Consumers defied expectations and went shopping. Retail sales in August 2021 jumped 0.7 percent, which surprised the markets, since consumer confidence readings had been falling sharply in recent weeks. That led most economists to expect a decline of 0.7 percent. It seems that those rising incomes, employment, and accumulated savings kept the consumer shopping, despite fears about the Delta variant.
The S&P 500 Index is at an important level, hovering just below its 50 Day Moving Average (DMA). This has happened several times before since March 2020, and each time buyers appeared to "buy the dip." I suspect they will again, so, no, I won't get bearish quite yet. I will go the other way and predict that markets will bounce next week. But what if I am wrong? Technically, the downside risk could be another 80 points (1.8 percent) to around the 4,365 level on the S&P 500 Index.

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

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 OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.



Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
MFBF Names Sunderland Cat Barn Cat of the Year
New Dentist Joins CHP Great Barrington Family Dental
Clark Art: Living With Les Lalanne
'all that moves' To Open in The Installation Space
Oct. 20 Medical Matters Weekly Welcomes Vanessa Britto of Brown University
SVHC Weekly Health Update: Oct. 15
Live Theatre Returns for MCLA
Mount Greylock District Aims to Increase Sense of Belonging for All Families
MCLA Volleyball Sweeps Salem State
Williams Volleyball Sweeps Conn College

@theMarket (385)
Independent Investor (451)
Retired Investor (62)
October 2021 (4)
October 2020 (2)
September 2021 (9)
August 2021 (6)
July 2021 (8)
June 2021 (6)
May 2021 (6)
April 2021 (9)
March 2021 (8)
February 2021 (8)
January 2021 (5)
December 2020 (6)
November 2020 (8)
Europe Interest Rates Euro Debt Economy Markets Recession Fiscal Cliff Metals Currency Crisis Federal Reserve Selloff Wall Street Jobs Europe Housing Election Deficit Energy Stocks Greece Congress Rally Retirement Pullback Debt Ceiling Stock Market Stimulus Japan Taxes Bailout Banks Commodities Oil
Popular Entries:
The Independent Investor: Don't Fight the Fed
Independent Investor: Europe's Banking Crisis
@theMarket: The Bottom Is In
@theMarket: Corrections Are Good for the Soul
@theMarket: A Week to Forget
@theMarket: Let the Good Times Roll
@theMarket: 707 Days
@theMarket: One Down, One to Go
@theMarket: No More Than 5 Percent
@theMarket: This Is the Year for Commodities
Recent Entries:
@theMarket: Markets Snap Out of Their Downtrend
The Retired Investor: Barbie Gets Better With Age
The Retried Investor: Golf Continues to Grow
@theMarket: Markets Are on the Cusp
The Retired Investor: Out of Gas
@theMarket: The Dip Buyers Return
The Retired Investor: Weather Worsens Global Trade
@theMarket: Markets Enter the Danger Zone
The Retired Investor: Moderates Winning on Tax Debate
@theMarket: Some Brokers Are Getting Bearish