The sell-off yesterday (June 11th, over 1800 points) was no big surprise to us. At the beginning of the month, we sent a letter to our in-house clients “warning” we were expecting a pull-back due to the market being so “over-bought” and the “uncertainty” in the current environment.
Here are some excerpts of the letter...
MARKET/ECONOMIC UPDATE JUNE 4, 2020
Currently, we (and the many analysts we work with) believe there is a “disconnect” between the market and what we’re hearing on the news. This is creating fundamental uncertainty with the issues likely to affect the economy in the coming weeks/months. We all know, the market does not like uncertainty. With the tremendous ongoing injection of FED liquidity into markets, they have once again become very “over-bought” and we suspect another pull-back could be looming on the horizon. Hopefully, it will not be as severe as the last one, providing the FED continues to “pump money into it.”
Where are we going from here?
If the market is indeed going to drop further then we have prepared some important support levels you should watch closely:
S&P 500 2952/ The Dow equivalent 24,750 then……..
S&P 500 2600/ The Dow 21,800 (most important), if this level is violated, we most likely will retest the lows from March. If this happens, you may wish to increase your cash position.
S&P 500 2190/ The Dow 18200 (made in March)
As always, we encourage you to contact our office for an individual review of your account(s).