Dips and Rallies
This week could be the most important week in the summer. This will be the busiest week for corporate earnings which will include several big tech firms reporting earnings. So far, the second quarter earnings season has been stronger than expected with 88% of S&P 500 companies reporting positive earnings. On Tuesday and Wednesday of this week, the Federal Reserve has a meeting scheduled which means that the market will be reactive to what the Fed says about their plans to taper back on buying $120 billion worth of bonds each month. Investors will pay close attention to see what the Fed has planned. Then on Thursday, the second quarter GDP report comes out. This report is expected to show very strong growth in the second quarter. We also want to point out something that we’ve been watching over the past few months. We’ve noticed that this year, most of the market pullbacks have been short-lived due to investors buying into the market during the dips. Look at the chart shown in this video to see data going back to 2010. It shows that flows into equity ETFs have hit a record this year, as investors continue buying in when dips occur in the market. We also know that there is $4.5 trillion in individual money market accounts and over $17 trillion in deposits with commercial banks. This means that there is a lot of what we call “dry powder” still out there that can be deployed if the market trades back. We think it’s important to point this out as the COVID Delta variant continues to be a worry. An example of this happened last week when we saw a big sell-off on Monday due to COVID concerns. Buyers quickly came in and bought into the market during the dip on Monday, which led to a rally the rest of the week. We’re watching the concerns around COVID carefully, but we were really impressed with the amount of money being used to buy in the dips.
The Fed Chairman
There is a lot of capital sitting on the sidelines ready to come in but there are also other topics that we will be watching as time progresses. These include the infrastructure bill that is still being debated, the debt ceiling issue that they always draw out and decide on at the last minute, and Jerome Powell’s re-appointment as chairman of the Federal Reserve. However, even with all these big topics being discussed, we want to reassure people that there’s still a lot of cash on hand and money that can come into the markets to take advantage of corporate earnings and this economy as it continues to move forward so strong.
On Monday of last week, we saw a large pullback in the market. In fact, all major indices pulled back over 1%. However, as mentioned previously, we saw the market rally and on Friday, the S&P closed at a price of 4,411. That gives us a new resistance level of 4,440 and a new support level of 4,380. Last week, we discussed the long-term technical analysis and as a follow-up, we wanted to go over the 200-day moving average which is currently at a price of 3,914. With it finally going over 3,900, it indicates that we might be seeing a bullish pattern in the markets, moving forward. The reason we give resistance and support levels each week is so that when volatility does hit or we have a trade back in the market, clients can watch these numbers along with the indices, in order to determine if we are starting to see weakness. We try to share as much information as possible so that when you watch your portfolio, which you can see on your Account View profile 24/7, and you see some volatility in the markets and information on the news, you know where we’re coming from in relation to trade backs.
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
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