Remember back when a 1 point swing in the S&P 500 ETF was a big thing. My brain has been a little frazzled lately so I may have the dates wrong, but I think it was all the was back in November of 2017. The world was a different place then. There were no trade wars, just insignificant trade balances compared to GDP. Rates were only going to go up by a total of 75 basis points in 2018, no chance of a potential for a full 1%. Inflation was just stable not creeping all the way up to 2%. Our President had pulled a JFK, sleeping with an adult celebrity while his wife was pregnant, without any lawsuit threats. And our FBI was investigating the “Russian” involvement with the election…. well that part is still there.
Now we have 3% moves back and forth as a given. If the SPDR S&P 500 (NYSE:SPY) was up yesterday the presumption is that it will fall today and vice versa. In many ways the SPY is trading in a range. But now that range is wide enough for Elon Musk to launch a SpaceX Dragon rocket through. On the low end at 256, the 38.2% retracement of the move higher from the start of the Trump era, and at the 200 day SMA. On the upper end the all-time high, way back in January just over 286. A 30 point range, or or 10%! Seems like a lot huh?
Technicians would call this a change of character. From rising trend to an intermediate consolidation. A pause in the uptrend. Pundits have called it a top and reversal. Perma-Bears the beginning of Armageddon. Which set do you think you see on the Television and in the press? A move to a sideways action is significant, but does not foretell the end of the free market economy. That could still happen but it will take a prolonged downturn in markets, meaning lower lows along with lower highs, to get there. It is not there now.
Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.