Equity markets faltered sharply yesterday. This was the worst day for the markets in more than 6 months, even worse than the selloff from the Evergrande debacle. The markets are retesting their lows, which is very common, so no surprise to us.
The S&P 500 “touches” the 100D again. Is this an echo of last week’s sell-off, aka a double-bottom? (See S&P 500 chart above.) 
Although it has weakened a bit, the HCM-BuyLine® remains positive, and there is still a reasonable amount of room before a sell signal emerges. 
This is a point where it is hard to control emotions, but what should you be doing? Buying the dip. Why? Because this is a low-risk entry point, one of two things will happen: Either the market will continue to selloff and we reduce exposure and wait for a new buy signal, or it holds, and you have entered at very attractive prices.  There are a lot of uncomfortable events taking place:
  • Debt ceiling and government shut down.
  • Massive tax increase being discussed. Just a side note: you may think you won’t be getting a tax increase because you are under the $400 thousand mark, which is the cutoff point according to the Biden administration. However, you need to think again because if taxes on corporations and LLCs increase, then you will be affected in a negative way from the tax increase. Fewer pay increases, fewer benefits, fewer employees which means you must do more work to compensate, and the list goes on. Oh, and one more thing, corporations and LLCs will just increase their prices for goods and services to make up for it, which will push inflation higher. Sounds wonderful, doesn’t it?
  • Massive spending bill with debt levels currently at nosebleed levels.
  • Interest rates rising.
  • Inflation moving higher. (Hopefully this is a short-term effect from the pandemic shut down)
  • Stagflation is now being talked about.
  • Bond prices are starting to fall, could this be the start of a bear market in bonds? 
This is why the HCM-BuyLine® is such a powerful tool. It does not predict; it just tells us what is actually taking place within the markets. What to expect from our proprietary research and indicators: The market will, in all probability, be very sloppy and volatile over the next few weeks, but we do expect it to stabilize and move higher by year-end.