This Is a washing machine.
But What If a child could climb inside to enter the unknown?
Think the stock market.
The What Is:
Bullish, with all indices strong on the weekly charts
Happy, with the strong employment numbers and expectations they will stay that way.
Confident, as reflected by the 18-year high in consumer confidence
Satisfied, with the current monetary policy of gradually raising interest rates.
Enjoying, an equilibrium between supply and demand
Ignoring, rising oil prices as we focus instead on a strong dollar
Euphoric, over Apple reaching $1 Trillion in market cap
What happens when the market contends with the What Ifs, hence climbs into the unknown?
The What Ifs:
Trump goes too far with tariffs.
China retaliates. Will they stop buying US debt? Remove the dollar as the world’s currency?
The Russian collusion probe implicates this administration.
The Middle East further impacts oil prices.
North Korea reemerges as a threat.
The midterm elections shifts the political power.
The economy overheats.
All legitimate What Ifs, which to date are Ifs not Is.
Over the last few months, whenever the market enters the washing machine of the unknown, volatility picks up.
Yet, unless the Ifs become the Is, each pullback has provided buying opportunities.
Today is a perfect example. We went to sleep with the threat of another $200 billion in tariffs against China. (What If)
We woke up with the market down 200 points.
The market rallied all the way back with Apple doing the heavy lifting, though with Transportation and the small caps following along (The Is).
Once children climb into this washing machine, they see colors, swirling lights and what appears to be an abyss.
However, within a few seconds, the children slide through the machine and back into reality.
Most children want to repeatedly slide through the machine, so they can experience going from fear to enjoyment.
Thus far, investors are doing the same.
S&P 500 (SPY) 282 pivotal support. A failure to hold will bring in sellers. 285 resistance
Russell 2000 (IWM) Unconfirmed bullish phase with 166.30 the 50 DMA pivotal area.
Dow (DIA) 252.70 pivotal support with 256.75 overhead resistance
Nasdaq (QQQ) 182.65 the next resistance to clear with support at 177.75 then the 50 DMA at 175.41