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Why the stock market is one or two bad financial reports away from a breakdown




Investors need to wake up in hell.

Just because the market stays well during the last month or so with boring trade war headlines does not mean that everything is good and dandy. The signs begin to build that the world economy cools faster than many balding pundits and aging stock price vectors will make investors believe.

The valuation of shares is therefore too late for a significant breakdown. Don't drink, drip, drip BS investors have experienced the last month – S & P 500 and Dow Jones Industrial Average are "only" down 3.8% and 4.1%, respectively, since late April.

Think 10% nosedive or more. In other words, a classic breakdown.

"Of course, some people can claim that the S & P 500 stays very well in light of this news [trade, etc.]. Well, this is true, but we must also be aware that as the 20% decline began in October, S & P was only 5.2% lower after three weeks, "Miller Tabak strategist Matt Matty reminds everyone.

Supremely put.

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Investors entered the Memorial Day long weekend, and still felt pretty good. The Dow has only truncated its fifth straight weekly loss, the first time it has happened since 2011. Still, there is still a hope that the market rally will soon return, and the downturn is normally given the uncertainty of global trade.

To many, the Federal Reserve is a friend, and the US labor market is humming along – both serve as strong reasons why stocks should not stay on the mat for too long.

Lost in this rose-covered eyeglass segment is proof that the Trade War is taking its toll on companies around the world. In turn, economic data and leading areas in the market deteriorate.

Some notable points from the pit:

  • The flight to safety has continued – the 10-year dividend is at its lowest since October 2017. [19659012] The yield curve inverted again on May 23. Remember last year that this is often regarded as a reliable recession indicator.

  • IHS Markit US production PMI for May greatly missed Wall Street estimates and dropped month by month. The sentiment between producers hit its lowest level in nine years.

  • The April reading on durable goods was softened across the board.

  • Copper prices are down 8.9% over the past four weeks.

"It just seems to us that the level of uncertainty has increased dramatically over the last 3 weeks … and this uncertainty is not going to reassure you soon," says Maley.

"What surprises us is that, despite these The signs of a rapid decline in US economic growth and renewed escalation in trading tensions, the S & P 500 has held up surprisingly well, said Paul Ashworth of Capital Economics. "If markets are linked, they hope for a US-China trading partnership next month or at the Fed to save the day, so they can come up with a rude awakening."

Ashworth believes incoming financial data points to a "sharp" decline.

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Many people on Wall Street I've been talking to over the past few weeks, continue to be optimistic about stocks this year. You can hear the optimism in their voices, although a large number of them are trimming winning positions for strength.

All this dialogue suggests to me that the market is one or two poor financial reports away from a sharp reversal as investment projects are scattered.

In this type of brake environment, Corporate America is not likely to announce that other quarters are in the process of reducing their 2019 outlook. I encourage all investors to listen to recent earnings talks from Target, Walmart, Deere, Macy and Best Buy to get a sense of the real profit the commercial war steals.

It must be priced for shares, it's so simple.

Nevertheless, let Twitter tirades begin with regard to this dose of news analysis. Everyone thinks they are right, until they are proven terribly wrong. Sometimes it is difficult to be a contrarian.

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