Stock Market May Have Another 3-4 Weeks Of Correction

Mr. Goldman's pre-market analysis sums it up in a very clear explanation of where we may be in terms of economic recovery or stock prices.

Here are Alfred Goldman and Senior Equity Market Strategist Scott Marcouiller in their own words of opening comments for July 6th market.

The stock market wasn’t patriotic last Thursday before the holiday weekend as the DJIA dropped 223.32 points. The market’s decline was exaggerated by the thin audience and very low volume. As Hawaii is still there and the market appeared to overdo it on the downside Thursday, we believe a day or two bounce back is likely. Past that, we remain in an eight week old correction/consolidation that is doing what corrections do – fear is up, optimism is down, and P/Es have improved.

The economic news last week was mixed but investors accentuated the negatives and eliminated the positives. Thursday’s employment report was weaker than expected but the data from the manufacturing side is improving.

After eight weeks of correction, many are wondering if we are in a normal time-out or a more serious top out. We believe it is a time out that will restore the bull’s vigor for three main reasons. First, market action relative to the 44% rally from the March 9 lows has been positive. The S&P 500 has given back a normal 20% of its advance. That’s a trade we would take anytime. Our second reason is that the supply/demand ratio for stocks remains bullish despite the big rally. And our third reason is that most economic data, other than employment, is starting to improve.

You know, we Americans are generally a great people but we have no patience. Instant gratification is our goal. At a July 4th party several guests expressed concern and unhappiness about the recent market pullback and correction. We reminded them of the big up and so far normal giveback. They seemed relieved for a moment, but frowns reappeared as they walked away. Oh well, human nature just doesn’t change. Investors should try to be up emotionally when the stock market is down, and become down emotionally when the market is up.

We continue to believe the market has another 3-4 weeks of correction/consolidation to both work off excesses and get a better handle on some of the uncertainties. Investors are advised to buy particularly after selloffs like Thursday.

Today – stocks, oil and metals fell on concern the recovery is faltering. Alcoa (9.86,AA) starts second quarter earnings releases July 8, so some discounting has already started. Early market weakness will bring in rally attempts. We are due a bounce.

Reprinted from Wells Fargo
https://www.wellsfargoadvisors.com/market-economy/economic-market-reports/stock-market-report.htm