The Gilmo Report

January 31, 2018

January 31, 2018

The market finally took a good punch in the form of a -1.09% sell-off in the S&P 500 Index yesterday, but like a resilient prize-fighter it immediately punched back. The indexes gapped up sharply this morning after President Trump’s State of the Union speech and a strong ADP jobs number that showed 234,000 new jobs vs. expectations of 190,000.

As expected, the Fed held off on raising rates today, but indicated that they would likely raise rates at their next meeting. This sent the market into an initial rally, after which it steadily deteriorated until we had a full-blown reversal off the extreme morning highs. But the reversal didn’t hold and the market jacked to the upside by the close.

As I’ve discussed recently, the optics of even a small pullback in the market, say of 2-3%, is not going to look pretty given that 1% is the equivalent of 260 Dow points. That also means that a 300-400 point Dow decline could just be the start of a deeper and perhaps necessary correction.

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