I don’t have any complicated quantitative models at my disposal. I read, I think, and then I have a hunch. Then I have lunch.
I think the market rose too far, too fast and that we are going to test the March 9 low. The economy is not growing as fast as many had expected.
This morning the Federal Reserve Bank of New York released its’ Empire State Manufacturing Survey. This index of general business conditions fell to -9.41 in June, down from -4.55 in May. Economists expected a slight dip to -4.6 in this measure of regional manufacturing conditions.
It’s midday Monday. After a 40% rally since the March lows, the S&P 500 is down 2.5% today. The Dow, which was just 5 points from breaking even for the year, is down 200 points, or 2.3%. The Nasdaq is down 2.7%.
The Wall Street Journal asks is this a bull or bear market? Signs Suggest Stocks’ Surge Is Blip Within a Bear; Still, There’s Opportunity.
This would seem to prove my theory from last week, when I decided that all the outflows from the large-cap U.S. stocks was a sign that the market had topped. I think we’re going to go back to near 7,000 on the Dow. Good time to take profits and wait for the sale to begin again.