An extended equity rally driven by tax cuts and earnings, a economic expansion that is hitting its final stages, and new shocks to the system such as emerging market fears, geopolitical tensions and a trade war that targets Germany, China are all turning attention to the US stock market and the possibility that there could be a reversal and sell-off.
September is always a challenging month for stocks and a sell-off would not surprise many Wall Street professionals.
Some who argue against a sell-off are saying that earnings are still strong but historically speaking a sell-off is possible and has taken place in such an environment. What we are looking at here at Classiarius, is the short-term technical aspect of the rally, which seems from a technical standpoint, somewhat overdone. Can this market continue to rally? Sure if the US economy continues to expand, and trade tensions with China are eventually solved.
However, the idea of a healthy correction of 10 to 15 percent is in fact welcomed. We can surely see a rally into 2019 and 2020 in US stocks, Japanese stocks as well, but a short-term correction is looking like reality.
Focus on FAANGs, S&P 500 and other majors. EM might be a trigger. Note we do not give buy and sell trade ideas on this platform.
More in the coming week,