In what has become an all-too common occurrence this year, another rally has been abruptly ended with prices of almost all stocks plunging all week long. At each attempt by institutions to “buy the dip” and impose some market stability, amateur investors follow quickly with fear and panic selling, creating another failed and short-lived rally.
The trigger for this behavior remains inflation and the federal government’s expected response via hikes in interest rates. This week’s catalyst was a pessimistic Wall Street Journal article, followed by a “surprising” rise in producer prices, all of which suggest inflation is NOT AT ALL under control as the Fed earlier suggested. Investors are losing confidence in anything the Fed says, now expecting more rate hikes, including one this coming week.
The stock market may react significantly this week – either way – if the rate increase is something other than 50 basis points.
Interesting is that our analytics show institutional buyers holding firm their long positions although most are now in the red – and thus ours are too. Not sure what is providing them such confidence at the moment, but very disappointing to be experiencing such uncharacteristic under-performance.
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