No, I don't think this is the beginning of the" big one" (Fred Sanford), but I do think the market will attempt one more move to the downside before we see a reversal.
Whenever you see a sizable sell-off, reversals usually occur the same day. This means the market is sufficiently oversold, sometime during the day the market will reverse and close up on high volume.
Today's meager attempt was not a reversal.
Yesterday's release of the April CPI report caused a mini inflation panic, and major market averages took a beating. At the close the Dow dropped 214 points, the S&P 500 21 points, and the NASDAQ 33 points.
The April Consumer Price Index (CPI) rose 0.6%, but after removing the food and energy components, the core index rose to 0.3%, which put both numbers above consensus estimates.
The results of yesterday's CPI number sent chills among investors since many were anticipating that the Federal Reserve was almost finished with its tightening phase. Now, all bets are off, and when the fed meets at the end of June, another rate hike may be in the cards.
The biggest fear among investors is a potential over tightening. Should this occur, the economy will probably sink into a recession. Since most rate hikes take 12 months to filter into the economy, no one knows for sure what the future holds. Since Wall Street hates uncertainty, they decided to shoot first and ask questions later.
For those of you who have been following my comments closely, the past few trading sessions are a warning shot across the bow. I don't think the market is going to give up this easily, and I feel a reversal and a summer rally are in the cards.
Once Wall Street sucks in as many investors as they can, the next downturn will not be a shot across the bow, it will be bunker busters and cluster bombs.
