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Market Update: Navigating a Slow-Motion Meltdown

Market Update: Navigating a Slow-Motion Meltdown
Photo by Maxim Hopman / Unsplash

The Nasdaq Composite index is down -2% as I write this, so I just wanted to weigh in with all of you.

There are lots of fundamental reasons why the markets and individual stocks are having trouble. You know those already.

From a technical analysis standpoint, I believe the stock market will continue to be in a tough situation through late June. I noted all this to paying subscribers in the Sunday "Caution Ahead" weekly update.

Forgive the mumbo-jumbo, but the indexes remain trapped within a pattern that technical analysts call a "declining wedge" that could last through late June:

I don't really know why markets form these triangle-type patterns. But I've seen this formation more times than I care to remember over the years, often leading up (or in a correction like this one, down) to a climax in the days before a major holiday.

As an example, the chart below shows the Nasdaq index from late 2018.

From October, the index fell 24%. It bottomed out on the last trading day before Christmas, December 24th - and then "magically" started rising again when trading resumed December 26:

My main point? Stay cool. Don't feel like you have aggressively make back losses just yet.

As my Little League batting coach used to yell to me as I walked up to the home plate: "Yastine, you don't have to swing at everything."

Wait for your pitch.

For us, the best pitch may not arrive until late June - or whenever the markets appear ready to break out from the current "declining wedge"

Until then, it's not a bad idea to stay in the dugout, keep any current losses from getting out of control, and bide our time.