The market fell hard on Wednesday afternoon, S&P 500 was down -1.47%. It was a sudden reversal after weeks long rally. However, there was no catalyst for the selling besides what was stated before:
Profit taking – given that everything, all stocks I have in my watchlist as well as holdings were red except GOOGL and cash equivalents like ICSH and SGOV. That tells me the investors were taking profits and reducing exposure as holidays are approaching.
Mixed FED officials’ talk about interest rates cuts. Some say the cuts will happen early ibn 2024, others say: “hold your horses.” None of it is news anymore, so if the markets are reacting to this, they are overreacting. On top of it, Morgan Stanley’s economists (whoever they are) said that the cuts will not happen until June. Given that Morgan Stanley has been bearish the entire 2023, they have an interest in market’s crash. Bears lost over $178 billion this year.
We now need to wait to see if this continues. It still can be a one day overreaction or we may see continuation of selling the rest of the week. Since there is no serious catalyst for this selling, I would lean towards a one day selling and then a slow move higher. Even tomorrow morning we may see selling to continue (though on slower pace) and then a slow down and possibly a reversal.
This could be a good opportunity to add stocks to investors’ portfolios. But if you are trading (for example options as I do) and you have a bullish exposure, you may want to wait before adjusting your trades. Last few weeks, I adjusted a few of my trades and it turned out to be a disaster. I still think, this is a bear trap.
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