Date: May 18, 2017

Bears Whipped into a Frenzy. Half Way There

I find it mildly amusing that after a 3000 point rally in the Dow, bears and pundits have been whipped into a frenzy because the Dow went down 370 points in one day. Talk about overly dramatic and idiotic. The bull market ain’t over folks, the same line I have said every day, week, month, quarter and year since 2009. Disavow and hate as they may, the bears have been, are and will be wrong.

Don’t get me wrong. One day, the bull will end, but it’s not right here and the signs aren’t there for an ending so soon.

Wednesday’s decline did much to begin to build the next wall of worry for the Dow to run to 22,000 and perhaps hit my 23,000 target. The Dow is now half way to my downside risk area of just below 20,000. The trading range, pullback in four of the major stock market indices which began in early March continues today.

Semis, banks and transports were hit very hard yesterday. Discretionary went down, but not nearly as much. Staples, utilities and REITs behaved very well, which is exactly what you would expect although in the final throes of a decline, the baby gets thrown out with the bathwater. I won’t be surprised to see these defensive groups get hit with the ugly stick if this declines makes it my downside risk zone.

When volatility explodes from low levels like it did on Wednesday, the normal pattern is a period of heightened volatility long after the final low is made and stocks begin their next assault higher.

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Paul Schatz, President, Heritage Capital