Wow, another wild day in the stock market yesterday. A 1.5% rally off the initial lows was followed by a 1% decline into late-morning. That, in turn, was followed by a 1.7% rally into mid-afternoon...which was then followed by another decline of 1.5%. Luckily, the market was able to see one bounce (a more mild one) into the close, so it was able to finish the day in positive territory. However, this is not the kind of action one sees in a healthy stock market.
If there is a silver lining to the dark cloud that this pull-back/correction is giving us, it’s that the lack of a new fiscal package from Congress is finally getting some of the blame for the decline.......Of course, we think the decline has a lot more to do with the fact that the stock market had become SO over-bought and over-valued...that it was going to take several “waves” of weakness to work-off those extremes. However, there’s no question that concerns over a lack of fiscal stimulus...as well as concerns about another “wave” of the pandemic...are helping fuel the decline during this renewed down-leg in this correction. (Lots of “waves” in our analysis right now. 😊)
Earlier this week, we highlighted our concerns about the technical condition of the European bank index...as well as weakness in the broad STOXX Europe 600. We're also watching Germany's DAX index...which is testing a key support level on a technical basis.
On this side of the Atlantic, we're closely watching the chip stocks...and one name in that group in particular. The chips have been an important leadership group, so whichever way things break in the near future should be important for the broad market.
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Matthew J. Maley
Chief Market Strategist
Miller Tabak + Co., LLC
Founder, The Maley Report
275 Grove St. Suite 2-400
Newton, MA 02466
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