Market Update For Late August

August 2019 is a tough market to comment on. All this week it appeared the stock market was successful in smoothing out the extreme volatility it’s seen in the past month. Then Friday after just one tweet from President Trump on the growing trade tensions between the Communist Chinese Party (CCP) and the USA, the Dow Jones dropped over 600 points, a -2.37% decline from yesterday’s close.

What else is happening in the world today that a tweet from President Trump could cause a similar, or greater market decline? There’s no shortage of pending tweets from President Trump that could take the Dow Jones down 1000 points or more in a single trading day.  

But as this is primarily a financial report I have to say what the real problem the current market has is that it’s overvalued to the point where a tweet from President Trump can result in a big daily, greater than 2%, decline in the stock market. It’s no more complicated than that, and for that reason I can’t bring myself to become bullish on this market.

Looking at the Dow Jones BEV chart below; what’s next?Will the Dow Jones break above its BEV -5% or break below its -7.5% line. I don’t care to risk a prediction on either possibility. I’m remaining a spectator and just watch what does happen.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 614\Chart #1   DJ BEV 2013_20.gif

This is a tough market to attempt a market prediction. Look at the Dow Jones in daily bars below. Thursday night I was ready to call a temporary suspension on my bearish market commentary, then Friday's extreme volatility (a 2% move) for the Dow Jones happened and I’m glad I didn’t. 

One thing to note on the chart below is the Dow Jones really hasn’t done much for either the bulls or the bears these past three weeks; fifteen NYSE trading sessions with some big daily moves that didn’t take it outside of its current trading range.

This won’t last forever. Next week or next month the Dow Jones should make a decisive (big) break out of the red box below containing the past three weeks of market action. Whether that breakout is to the up or downside most likely will be how the market goes for the rest of 2019.

Bear that I am, I’m thinking the Dow Jones will deflate below 24,000 on its next significant move. But the bulls could be right, in which case we’ll see a few more all-time highs for the Dow Jones below. So who is right? The choice is yours, but the safe position would be in remaining neutral in a market like this; an aging advance that began over ten years ago. After all there are plenty of times when staying out of the market is the smart thing to do, and I would say this is one of those markets.

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