Major indices have bounced strongly since Feb. 9, ending a steep decline generated by rising interest rates, but the market could retest lows in the coming weeks and punish recent dip buyers. More importantly, those support levels could break and set off the next leg of an intermediate correction that exposes a significant portion of 2017 upside. Given the threat, market players should take defensive steps to protect returns and adapt to a more adverse market environment.
The dismissal of Chief Economic Advisor Gary Cohn removes a major obstacle to metals tariffs and other measures that are likely to target Chinese imports. These policy decisions could trigger a trade war that has a strongly negative impact on U.S. growth. Unfortunately, inflation is likely to escalate at the same time, raising the specter of stagflation as Americans are forced to pay more for everything from canned goods to their favorite Amazon.com, Inc. Prime purchases. (For more, see: Which Stocks Will Win or Lose From Steel, Aluminum Tariffs?)
The threat of a trade war could send major indices back to February lows, with a breakdown exposing a big chunk of 2017 upside. …read more
Read more here: Market Could Retest February Lows
Category: SPY, QQQ