Hello Folks
Just in time for my “routine update” comes a troublesome sell-off/distribution day in the markets, with the oft-watched Dow Jones Index closing on March 21 with a 237 point loss. Most impacted were the NASDAQ members and small-cap stocks (think “S-Fund”), with international stocks least impacted.
A variety of speculation exists as to why this occurred, most of it pointing towards the Thursday March 23 vote on Paul Ryan’s American Health Care Act (AHCA), which will pave the way to repeal Obama Care. Reportedly some GOP members are against this, a major action-item for President Trump’s team, and if it encounters problems with passage, then it is believed that other action-items will also see problems ahead. As I have mentioned here before, the markets are largely (…mostly…) psychological in nature, and do not like uncertainty or confusion. Those are the elements of triple digit losses.
Lets take a look at some charts. Evident is that the volume was almost double its average volume, with price action to the downside. This is a red-flag in my book and something to keep an eye on. It is important that the SP 500 recover back to the 2360 level as soon as possible.
A look at the SPY Exchange Traded Fund (ETF), which mirrors the SP 500 index, is helpful for volume analysis:
So in summary, the action on March 21 was undesirable and warrants close monitoring. As discussed, we want the SP 500 to return to at or above 2360 as soon as possible. I remain 100% S-Fund for the time being.
Thank you for reading…talk to you soon…
-Bill Pritchard
