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Wednesday, March 28, 2018

Its Time To Say Good Bye To This Aging Bull !


Its Time To Kiss Goodbye To The Aging Bull
On 20 March when Nasdaq composite was at 7500 , I said on this blog that an `Island Reversal’ price action that occurred was an ominous sign that will lead  Nasdaq fall to 6900. Today 28 March we saw that happened. With heighten volatility and  markets apparently intent on retesting the lows set in early February, investors must now to prepare for a  far less forgiving investment environment.

The firm stable and quite uptrend of 2017 has changed  in last couple of months,
the leaders of last year’s bull market—Facebook, Tencent, Microsoft, etc.—are falling by the wayside with increasingly disturbing frequency. The market likely loses important FAANG leadership in Facebook. Facebook and their Cambridge Analytica  mined and sold our personal data, its so serious , its not going to come back this time. The FTC is looking into Facebook practices.   Remember the Internet bubble was burst by judge who threatened to break up Microsoft?  The market volatility spiked after a long quiet period in Feb and has since been  making lower highs on heightened, it’s a canary in the mine! Two-year treasury yields are now above the S&P 500’s dividend yield for the first time since mid-2008, and Libor is surging to a 3 year high make stock unattractive and raised the cost of doing business.
But some are so in love with this  bull market are understandably reluctant to kiss last year’s bull trend goodbye. If anything is going to re-ignite the aging bull flame, its going to be  lower interest rates and stronger earnings.  But rising business cost and inflation will crimp corporate profits. Meanwhile, a full-blown trade war will almost guarantee lower profits across much of the markets.
With inflation and interest rates on the rise , it looks highly unlikely that rates will fall in the near term under any scenario outside a recession and  a recession will prove detrimental for equities.

But at the moment it would take something of a leap of faith to buy into a resumption of the former bull-market-in-everything, it’s not easy to see how the flame could be rekindled.

The only time you can get bullish again which means buying in terms of a sustained leg up is if the Nasdaq Composite were to get back up to  break above the 7637 level  and hold above it. After all this bull have been led by the Tech sector.  The last thing I have to say is we will kiss the bull goodbye soon!



All posts and charts are for educational and illustration purposes only

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