September 7, 2023
By Peter Bower
Jerry Lee Lewis’ song is a good headline for the current stock market action. Not only is volatility increasing, but the nature of it can also be disorienting. For example, what went up last week is going down this week. Next week, it may be the opposite again. One analyst puts a buy rating on a company’s stock, and another puts a sale and much lower price target on the same one. The stock may go up or down, no way to tell. There are other examples of bizarre activity that defy explanation.
During periods with many cross currents and inconsistent trends, even sophisticated investors get confused. A natural inclination is to withdraw and sit on the sidelines. This is not always wrong but concedes long-term goals to impulse and fear. Plus, this implies market timing which most experienced investors concede is a fool’s game. However, strategic positioning sometimes may require lightening up to reduce risk and volatility. We are carefully watching the market’s internal technical action for clues as to when to implement this tactic.
Recently, the most important technical indicator we watch, money flows and its breadth, has been weakening. It is too early to announce a reversal of the bullish signals it had been sending. More likely, it points to increased volatility. We are already seeing this. Fundamental factors are still strong. People have jobs, inflation has come down, and business profits have held up very well. We will act when and if necessary, but in the meantime, stay steady my friends.
The Lonely Bull
