Stocks Thrashing Around for a Bottom But Other Markets Hold Clues
Volatility happens in both directions. That has been the theme all week. Anyone who has bought strength or sold weakness has been left holding the bag. And I don’t think volatility is over, but much or most of the price damage should be. Worst case, as I have written, Dow 25,000 or so could be seen. The reward is a move to 28,000.
With stocks thrashing around trying to find a low, I often look at other markets for signs of confirmation. The bond market has been the primary beneficiary of the stock market pullback. It certainly looks like bonds saw an emotional peak on Wednesday morning. Gold also saw some type of peak on Wednesday although it may not be as consequential.
Crude oil has completely fallen out of bed and that may be a more important canary than anything else right now for global economic growth. While the commodity is very volatile and prone to external factors influencing price, I am always concerned when I see it fall hard. However, it probably provides more false warnings than real ones.