Momentum Monday – The 'Kerplunk Market'
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Good morning…
The market and possibly the economy is going ‘kerplunk’.
Let me explain it like I would explain it to a child playing ‘Kerplunk’ for the first time.
The object is to have as few marbles in your cup at the end of the game.
I imagine when Trump played the game he claimed victory by pulling all the sticks out on his first turn and yelled ‘I win’.
The markets are reacting right now to a lot of economic policy ‘shocks’ (all the sticks being pulled out at once)- mostly trying to price in the shock to growth stocks and a recession from the tariffs.
Sometimes the best way to win is to not play.
As always, I tour the markets with Ivanhoff and we did not find much to be encouraged about other than Gold which is niot something I am too excited about…
Welcome back to Momentum Monday!
In today’s episode of Momentum Monday, Ivanhoff and I discuss the following:
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Impact of Canadian Tariffs on Housing Market (0:00)
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Navigating Market Volatility and Investment Strategies (3:15)
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Tactical Trading Strategies in Volatile Markets (6:16)
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Asian ADRs and Market Performance (9:15)
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Strategies for Navigating Bear Markets (12:09)
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Globalization and Economic Alliances (15:03)
In This Episode, We Cover:
-
Impact of Canadian Tariffs on Housing Market (0:00)
-
Navigating Market Volatility and Investment Strategies (3:15)
-
Tactical Trading Strategies in Volatile Markets (6:16)
-
Asian ADRs and Market Performance (9:15)
-
Strategies for Navigating Bear Markets (12:09)
-
Globalization and Economic Alliances (15:03)
Here are Ivanhoff’s thoughts:
QQQ and SPY bounced to their 200-day moving average, which also coincided with their VWAP (volume-weighted-average price) since their all-time highs. Then, Trump announced new tariffs and the market began a new leg lower. Gold and Chinese stocks initially held better than the rest, but even they pulled back on Friday. We might have reached the point of widespread liquidation, where people will just sell to raise cash or hide in Treasuries. The only green stocks on Friday came from the defensive utilities and consumer staples. The market is sending a clear message. A trade war with the rest of the world is likely to lead to an economic slowdown which is not priced yet. Even if that recession doesn’t happen, the market is going to overshoot and discount it anyway.
The next potential support level for QQQ is 450; for SPY is 540. I think they will test them next week and then we could see a more sizable bounce towards their 20-day moving averages. Nothing goes straight down. The market is especially choppy during corrections and bear markets. Obvious breakdowns are often followed by sharp snap-back rallies to declining 20, 50, or 200-day moving averages. I don’t know if the indexes are in a bear market or if this is just another typical 15-20% correction we see every year. Bear markets are often clear only in hindsight. My definition of a bear market is a prolonged stay under a declining 200-day moving average. The most recent example is 2022. I don’t know if we are due for another one so soon but I will remain open-minded to the possibility of it. I have been through enough market cycles to truly believe that no price is too low during a bear market drop and no price is too high during a bull market.
China and gold have held much better than the rest of the market during the correction in the past six weeks but even they are vulnerable to forced and panic selling. I still think Chinese-related ADRs are likely to be among the leaders when the indexes have their next multi-day bounce but prepare for some market volatility before that.
And here are the charts discussed:
