The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Call it a month.
Futures began slipping slightly last night and fell a bit more as Europe traded. Once our market opened, the S&P quickly dropped from down 10 to down 45, and it stayed there for most of the day. News wasn’t particularly interesting nor material. The yield curve did steepen over the day though, perhaps that had a chilling effect on stocks. Fed Funds futures didn’t change much. Looking for clues elsewhere, the currency markets were calm, commodity metals rallied, and bitcoin fell over 3%. Capital flow almost normalized today, printing 96%.
If equity markets dropped significantly because of some significant development, it doesn’t appear obvious and it didn’t affect other major markets either. Capital flow was almost normal, but light, signaling that investors are returning to their usual activity at month-end.
I don’t see a hidden fundamental behind today’s stock action. It looks like investors took some profits on the last day of the month, on the heels of all-time highs in the S&P 500. We’ll have to see if there’s continuation next week but I am suspicious. The S&P is up for four months in a row and is up almost 10% year to date. The chart looks bulletproof and the last handful of significant events have provided all-clear signs to the market.
There’s just too much inertia to the upside coupled with a lack of worry on the horizon for the crowd to panic. I think dip-buyers are going to act with boldness in September and all investors will have the 3-day weekend to figure out their plan for the rest of the year.
Short-term moves will keep us guessing but the tide is rising and consensus is that the bull market is intact and healthy.
After Labor Day, when we put summer behind us, the capital is going to flow through equities to the upside.
At this point, it’s not rocket science.
There will come a day when the growth goes negative and the outlook sours. That day isn’t likely coming anytime soon though.
See you Tuesday, enjoy the long weekend.
-Mike
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