Normally, I don't wait for crashes or melt-ups, and this is so now, even as the market shudders under a mounting weight of essentially non-market problems.
This topping action can take weeks or months but it's now on, a work in progress, with spikes up & down, but the next big move (more than 300 S&P points) will be down.
I like this BARRON's article:
A Real Dark Night of the Soul
It may be darkest before the dawn, but with the world inching closer and closer to an all-out trade war between the world's two biggest economies, it's starting to feel more like "a real dark night of the soul [where] it is always three o'clock in the morning," as F. Scott Fitzgerald wrote in one of his more pessimistic essays.
Fitzgerald, whose life is in many ways a study in tragedy, certainly knew a thing or two about hopeless situations, even as his eloquence secured his place among literary greats. Of course, many of his problems were self-manufactured, stemming from his alcoholism or jealousy. Yet the same could be said of the market's issues. Today's correction seems like an inevitable move downward as the reality of tariffs–which investors tried to ignore–came home to roost; and tariffs themselves are the result of tough talk that has escalated into potentially crippling levies on billions of dollars worth of goods at a time when the economy was otherwise humming along nicely.
The Dow Jones Industrial Average tumbled 219.21 points, or 0.88%, to 24,700.4, while the S&P 500lost 19.82 points, or 0.71%, to 2774.02, and the Nasdaq Composite slid 42.59 points, or 0.55%, to 7716.61.
While earnings and economic data were able to hold off pessimism for a while, the White House's decision to double down on even more punishing tariffs, and China's angered response, sent investors scurrying for cover.
"Trump’s escalation of the trade war between the world’s two largest economies is going to trigger a chain reaction of negative events around the world," writes Nigel Green, chief executive of deVere Group. He warns that investors will have to endure months of posturing that will lead to market turmoil. "Trump’s trade war is a masterclass in self-harm for the U.S. and global economy.”
Still, SunTrust's Advisory Services' Keith Lerner writes that it's not time to go into panic mode just yet: He thinks that the market remains in a broad trading range where it's "normal for stocks to trade in a choppy fashion during midterm election years as rhetoric and noise out of Washington tends to heat up."
He acknowledges that the backdrop is becoming "more challenging," but he believes that even with this bumpiness, the U.S. market will continue to outperform international markets. He writes that "dividend strategies should hold up relatively well. Similarly, high-quality fixed income and alternative strategies should help smooth out the ride."
Second-quarter-earnings season, which begins in earnest later this week, could also offer a bit of a respite, but good numbers can only do so much. CFRA's Sam Stovall estimates that it will be the 26th straight quarter in which actual earnings per share blow past end-of-quarter estimates. "Yet even though investors are largely discounting the effects of what may become a global trade war, this possibility will likely lead to elevated volatility, if not a renewed threat to the market’s near-term attempt to set a new all-time high."
Leuthold Chief Investment Officer Doug Ramsey puts it more bluntly: "The nine-year stock market 'party' may not yet be over, but it’s getting pretty late."
Of course, Fitzgerald was no stranger to a good party (and their mythologies). "I entertained on a cruising trip that was so much fun I had to sink my yacht to make the guests go home," he famously noted. A trade war might make for a good iceberg.