The Tide has Shifted and the Market is Embracing a Correction…
As I’ve stated in the past, momentum in something as large as the overall stock market is a slow moving task. But when the correction/movement happens, it’s easy to stay caught up in rooting for the rally and not selling.
Now the major indices are off of their highs between 5-7% which is a significant pullback across the board. With the new year, sentiments setting in and people hitting the bid as they are beginning to panic sell, stocks are definitely retracing.
Some of the events that are to blame for aching the back of the stock market are just natural events like the weather. Having an already inflated market that has all but gone exponential over the past few years, meant that something was bound to come around and put downward pressure on it. It could have been anything: a potential war, terrorist attack, or even an announcement from a G20 leader coming out and making a consequential statement.
Currently the U.S. is experiencing one of the coldest winters in years due to what they are calling the Polar Vortex. Major weather storms in the Midwest and East Coast of the U.S., can be blamed for the lower than expected sales for companies such as Ford, GM, and Toyota. News like this was just the nail in the coffin for the US sector this week.
Short-term news for the time has clearly given the market it’s direction for the year…
Zerohedge.com just reported that Obamacare will shrink the workforce by 2.5 million in less than a decade. Of course this would be characterized by long-term downward pressure on the U.S. economy and stock market. Combine this with a society that wants handouts from the government and we know that the Fed will have a uphill battle to face in attempting to inflate the bubble while simultaneously avoiding hyperinflation.
Speaking of the Fed; the new chairmain Janet Yellen sure has her work cut out for her as she enters into her new position. If I was her, I would let the market go as far down as possible that way she could sidestep any blame for the market’s volatility and have a lower bar set for her. Just saying…
I doubt this will be the actual tactic though… She is most likely going to hit the ground running, wanting to seem proactive and initiating further stimulus into the economy. President Obama had this happen to him to a large degree. He entered into his first term as President during the worst financial crisis since the Great Depression. He could have chose to to allow the free market to correct on its own and allow the previous President to own the bulk of the blame for the financial collapse, but instead he comes in continuing the mother of all bailouts and does a massive economic stimulus package to inflate our way out of the short-term pain that we could of endured and let it get past us. But instead, the bubble lived on and so does long-term unemployment and sluggish economic conditions.
In any case, the momentum of the market is shifting, and there are catalysts in place that are forcing it in a downward direction. The short-term trend is not in the U.S. stock market at the moment.
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Chief Editor at CrushTheStreet.com