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.
