The unwavering uptrend in stocks in the last few years may be seeing disruption with the return of volatility in 2018. Institutional and retail investors are looking for various gauges to measure the effect of volatility and how that’s trending in the coming quarters. Most analysts think there may be more upside and opportunities to come this year even with (or perhaps because of) the emergence of geopolitical issues.
We are coming to the next phase of the divergence. I woke up this morning, turned on the box and first commentator I saw said we’ve started the next leg up in the bull market. Some of these people take it for granted the market is going up again. Has anyone noticed the Dow and SPX peaked in January?
A year ago we asked 16 industry experts and MODERN TRADER analysts to provide their forecast for various market sectors in 2017. More than half had a positive outlook on the S&P 500, but only Dan Gramza predicted that the S&P would gain more than 15%. Alan Bush, Joe Cornell, Carl Larry and Tim Melvin all predicted the broad market would gain more than 10% in 2017.
A week ago, heavily weighted tech stocks were taken to the woodshed. By far the most important market observation we could have is to see how they’ve recovered. If they don’t recover, there is little hope for the market to get a sustained leg up through the summer.
This brings us to Friday's widely-publicized "Tech Wreck." Ahead of the weekend, the massive, former market-leading FAAMG stocks (Facebook, Apple, Amazon, Microsoft and Google) led a big reversal in U.S. tech stocks. As of writing, each of those stocks is trading off over 5% from their intraday highs, and the NAsdaq 100 index of technology stocks is trading off by over 4% as a result.
Well, no one saw that coming! U.S. technology stocks took a big plunge today, causing the Nasdaq 100 index to drop 1.5% from a fresh record high that it had hit earlier in the day. Technology stocks have been rallying aggressively in recent times, as momentum-chasing speculators bought names such as Alphabet, Amazon, Apple, Facebook and et al. like there was no tomorrow.
It was a decent week for the stock market. Why? It could be because President Donald Trump was out of the country and the dialogue shifted away from scandal to geopolitics. The stock market didn’t have a chance to get upset as everyone took a breather from the growth agenda being interrupted. But he’s back and the domestic problems have not gone away. Who knows what they’ll come up with next.