Finally, Some Volatility & a Buying Opportunity

By 2018-01-30 October 3rd, 2019 Market Commentary

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Finally some volatility and a buying opportunity…

But do not get confused: this is not the beginning of the next Bear Market. The US stock market does not seem to be expensive enough yet. It will be one day, but that day is not today. During 2017, many pundits, perhaps based on political reasons only, called the stock market expensive. The problem is that while GDP and profits accelerate, the real economy expands and expensive gets more expensive. Until when? Simple answer, until the opposite occurs: GDP and profits decelerate and the real economy contracts. When will it happen? The economic data will tell us. Until then, this is a Bull Market and volatility during 2017 and now, only provides buying opportunities.

Nonetheless, volume caught my attention yesterday. The market sold off on increasing volume. This is important and negative. Bull Markets are confirmed when price moves up on increasing volume and low volatility. Bear Markets are confirmed when price moves down on increasing volume and higher volatility, which is what happened yesterday. But the other components: GDP and corporate profits remain strong. In addition, inflation, although higher, does not seem to be a threat to the economy yet. Thus, every pull back should be taken as a buying opportunity.

Saul A. Padilla, RIA

Saul A. Padilla, RIA

Registered Investment Adviser and founder of Greenwich Creek Capital Management LLC, bringing over 37 years of experience in managing discretionary and non-discretionary investment portfolios for wealthy families and institutions. His main focus is to protect invested capital by re-balancing the allocation of cash, equities, fixed income and commodities, while closely monitoring macro-economic indicators and market trends to determine the transition phase between the completion of a Bull Market and the beginning of a Bear Market. He started his career in early 1987 mainly managing family financial investments.