And now we are down again.
The Dow started the week at 25,900 and we hit 26,130 on Tuesday but now back to 25,830 this morning so, on the whole, we'll be lucky to finish the week out flat. It's a clearly manipulated, low-volume market and JP Morgan points out that, despite the S&P 500 surging 20% from its December low – almost every catagegory of investors tracked by JPM, from individuals to hedge funds and computer-driven trading, has shown little inclination to chase the rally.
Dwindling liquidity is often dragged into discussions of market meltdowns. In December, for instance, when the S&P 500 plunged toward the brink of a bear market, both President Donald Trump and strategists from Goldman Sachs flagged it as potentially escalating the sell-off. While very dangerous if the market turns negative, JPM says these low-volume conditions could also keep the rally going:
“Given liquidity, it is plausible that just short covering, buybacks, dealers’ gamma hedging, and some limited re-leveraging drove the entire recovery. This, in turn, opens the possibility that the current rally can continue during the spring.”
JPM cites the dramatic reversal in Central Bank policies as putting another floor under the market. While I agree with their premise, I believe it, like most bullish premises, is ignoring the risks of the overall Global slowdown driven by the Trade Wars, Rising Oil Prices and Brexit as well as the dramatic slowdown in Corporate Profits we'll see now that they don't have additional tax breaks and, of course, rising wages will eat into profits as well.