Challenge for Investors: Balancing the Price Action Against the News

By February 8, 2020 No Comments

After four days of straight-up action, the market finally took a rest on Friday. The jobs report for January looked quite good on the surface but some critics stated that good weather made the report look better than it really was.

The coronavirus continued to be the primary news headline but the market still does not act very concerned about it despite the huge number of people that are now quarantined. J.P. Morgan is now predicting that there will be a large drop in China’s GDP in the first quarter before a huge bounce back, but the economic ramifications of this are being shrugged off by the market.

Late this afternoon, Apple (AAPL) extended the closing of its stores in China for several more days and has not yet set a solid date for reopening. It is likely that others will follow suit. Whether things of this sort eventually impact the market we will just have to wait and see.

While the bulls were quite happy about the market action this past week, many of them are wondering how much longer the strong demand for stocks can continue. There is still cash looking for a place to go and there doesn’t seem to be many alternatives other than equities.

Technically, the indices are still extended and in need of rest but there is nothing to indicate that a major shift is about to occur. On the contrary, the current environment is still extremely supportive of dip buying and that will likely remain the focus until there are some bounce failures.

Navigating this market right now is quite challenging as we try to balance the price action against the news flow. They are moving counter to each other and we have to wonder which will change first.

Please be sure moment to read my column on Real Money Saturday: “The Siren Song of Market Timing.”

Have a great weekend. I’ll see you on Monday.

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