September 25, 2023
Good morning,
Fear is a stronger emotion than greed, and markets fall faster than they climb. The adage that markets go up on an escalator and fall through an elevator shaft is good to remember during swift declines like last week’s. In round numbers, U.S. equity indexes were off -3% last week, while international equity indexes were down -2%. Bond aggregates were off 2% on the week. Indexes around the world were down every day last week. It felt bad but wasn’t mathematically.
Since the beginning of August, the equity market (S&P 500 Index) is down 6% from its high. It is the biggest decline since the 8% drop in Feb-Mar of this year (the regional bank crisis). Recall that 2 to 3, 5-10% corrections occur in markets every year on average. Until proven otherwise (technically), the market is in the control of normal corrective forces at this time. As mentioned last week, 4,200 on SPX is a major line of support for the tape – it is 2.6% away.
The market message, interpreted through technical (supply/demand) signals, supports a correction through the seasonal weak weeks through October. If that message changes, you’ll be the first to know.
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This coming week is all about the U.S. budget or lack thereof. Pundits presently place a 75% chance of a government shutdown beginning Saturday. It’s hard to see the correction ending until we get past this budget battle. See you Thursday.
Be well,
Mike
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