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The market fell hard on Friday wiping out the week’s gain after fears resurfaced regarding the global economy. Before Friday’s sell-off, the big news came from the Federal Reserve after it publicly moved back into the dovish (easy money) camp and cited concerns regarding the global slowdown. The Fed said it would not raise rates again in 2019, which is lower than the two hikes expected before the meeting. The Fed also said it wants to end the reduction of its massive $4.2 trillion balance sheet by September which means more easy money for Wall Street. The fact that them market ended the week lower could be the beginning of the Great Disconnect, an event that means the market is now longer marching higher on any signs of more easy money. Remember, the primary driver of the entire bull market we have witnessed since the historic 2009 low has been easy money from global central banks. So, when the Fed speaks, I’ve learned to listen. But if that relationship is changing – we need to pay attention.
Monday-Wednesday’s Action:
Stocks were quiet on Monday as the financials broke above resistance and led the market higher. Meanwhile, shares of Boeing were under pressure after The Wall Street Journal reported the Department of Transportation and federal prosecutors were scrutinizing the development of the company’s 737 Max planes. In other news, shares of Facebook were also under pressure after worry spread regarding the possibility of more regulatory scrutiny.
Stocks opened higher but closed mixed to lower on Tuesday after conflicting reports were announced regarding the progress of the U.S. China trade negotiations. In other news, the Fed started its two-day meeting. After the close, FedEx fell after they slashed guidance and basically said the global economy is slowing considerably. On Wednesday, stocks ended mixed after President Trump said China’s sanctions may last for a long time. In the afternoon, the Fed ended its meeting and said there will not be any more rate hikes in 2019, which is lower than the two hikes expected on Wall Street. The Fed also said it wants to end the reduction of its massive $4.2 trillion balance sheet by September. The Fed also lowered its economic growth forecast the year.
Thursday & Friday Action:
Stocks rallied on Thursday after mortgage rates fell and investors cheered more easy money. Shares of Apple and Micron rallied nicely which helped lift tech stocks and the broader market. Elsewhere, Levi Strauss started trading after a 34-year hiatus and jumped 35% above its IPO price. On the downside, shares of Biogen plunged after the biotech company ended its trials for Alzheimer. Shares of Guess? Inc fell 15% after the company reported lousy earnings. On Friday, the market fell on renewed fear of a global economic slowdown.
Market Outlook: Bullish Tailwind Continues
The market remains very strong after the Federal Reserve reversed its stance and moved back into the easy money camp. Near-term resistance is 2018’s high while near-term support is March 2019’s low, the 50 DMA line, and then 2018’s low. As always, keep your losses small and never argue with the tape. Do you know the most under-valued stocks in the market? Our Members Do. Take a FREE TRIAL – CheapBargainStocks.com
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