It’s been awhile since I’ve commented on the markets, but for a reason. In my last post on the markets, I indicated that the bull market was not over yet. The movers in the market, FANG (Facebook, Alphabet, Netflix, and Google) were ripe for a correction. Many suggested that this was the beginning of a new bear market. So, let’s take a look at the toll taken out on FANG. I think you’ll agree that the rebounds in most cases were strong, Alphabet (Google) being the weakest. We’ve had two corrections and the positive sign is that the second correction didn’t go lower than the first in all cases.
I’ve mentioned in the past that we should expect a sideways move in the markets, this will give the markets time to build a base to move higher. The 2016 correction lasted 6 months before putting in a bottom and we are barely 3 months into this correction.
It is possible that the S&P 500 could rally next week and approach its all-time high. My guess would be that the next correction of any substance may occur in June with the Fed raising interest rates once again. We could see the S&P 500 moving below the March low and testing the 2500 level. This kind of a move happened in 2016! It would create a very bearish sentiment, the kind needed prior to a very strong bullish move in the markets. If that doesn’t occur we should at least see more of a sideways move before the markets move into new bullish ground with a top in 2019.
The US Dollar and the Peso
The US dollar has appreciated almost 10% since I mentioned the possibility of a rally in my last Peso update. However, I think that the rally is coming to an end. My point and figure analysis shows that the price objective has been met. The July elections in Mexico appear to be the motivation for the strength of the dollar. The question remains as to whether a win by AMLO has been fully discounted.