Will it hold?

The current liberal fantasy: Special Counsel Robert Mueller will present a series of reports to Congress about the activities of the Trump campaign during and after the election along with some indictments, including one for the President for obstruction of justice. Congress will then begin impeachment proceedings and remove the President from office, ushering in the Pence administration, followed in short order by a Blue Wave in the 2018 midterms that renders Mr. Pence impotent (legislatively speaking).

Okay. Maybe.

Or…and I’m just thinking out loud here…we have another Saturday Night Massacre, wherein Rosenstein and Wray are removed from office, the new appointee at the top of the Justice Department ends the investigation with the stroke of a pen and everyone freaks out for a week, followed by some other distraction, like a surprise Kardashian pregnancy or another Hollywood star being outed as a abuser of women. Then we all gear up for the new NFL season and President Trump cruises into a third chaotic year in office.

Which one of these outcomes is better for the mental health of the investor class? Maybe neither. Maybe the Constitutional Crisis brinksmanship pushes us through the floor established this past winter at around 2550 and then permanently puts risk appetites on a downward slope for the cycle.

I don’t think a rational person could believe they possibly know which of these things will happen but I do think it’s rational to say neither is good for sentiment.

Is it too hopeful to expect a third attempt on the support level in this market to resolve in a bounce? Is it more reasonable to believe that a third attempt will be the straw that breaks the camel’s back and takes us out of a trendless consolidation and firmly into a downtrend?

As you can see in the chart above, we’re down from the highs. In the bottom pane you’re looking at the percentage of S&P 500 stocks that are currently above the 200-day moving average – 56% of them are, meaning more than half of the market’s stocks are still in an uptrend. I’m not saying that’s bullish – in fact, until we’re closer to 30% or even 20%, where this measure of internals bottomed in the summer and then the winter of 2016, it’s too hard to say we’ve had enough pain to reset.

This is time when Wall Street’s Greek Chorus chimes in with “But earnings are going to be good” and “The economy is still strong.” If they still think that stocks trade on fundamentals or economics in the short-term by this point in time, these people are hopeless, lost causes.

So the question is, if (when?) we revisit support, will it hold? And what will (most) people do if it doesn’t?

 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Institutional Repository commented on Dec 28

    … [Trackback]

    […] Read More Information here to that Topic: thereformedbroker.com/2018/04/12/will-it-hold/ […]

  2. DevSecOps commented on Jan 17

    … [Trackback]

    […] Read More Information here to that Topic: thereformedbroker.com/2018/04/12/will-it-hold/ […]