Stocks are falling hard once again this morning. Although the trade war with China is being blamed, this is also an expected technical move lower. After stocks hit to top of their trading range late last week, it was easy to predict a drop in stock prices from there. This is the standard reaction in a technical trading market. The crazy thing is that it was optimism on the trade war with China that caused stocks to climb last week. It was also an easy call to predict that the sentiment in China would quickly sour. This cycle has happened so many times in the past year that it amazes me that the markets react positively to potential improvements. This situation isn’t going away any time soon. Stock prices just need to reflect this reality vs. bounce up and down based on statements and Tweets.
This is “Jobs Week,” with both ADP and The Bureau of Labor Statistics (BLS) set to announce their estimates of new hires in the month of August. Since job growth has been slowing, this report will be closely watched. If we see the pace of new hires continuing to slow, this will add to the fears of what I believe is an imminent recession. The US market has held up better than Europe, which has slowed sharply in recent months. The key to remember is that in 100% of the times the US unemployment rate hit a cycle low, it was followed by a sharp move higher. This is largely why I feel strongly that there are more troubles ahead.
There is currently little risk in floating. However, watch the markets closely if you choose to float.