Market was very volatile past week, but we expected it, Isn't it! We did expect market to be volatile going into earnings season, its a normal process. We have 2 factors in current market situation which will make or break this market... What are these 2 market scenarios driving current market direction?
1st scenario is very common and happens 4 times every year (since earnings season comes 4 times every year), market direction is decided based on company earnings & guidance. Typically the earnings season is over in 3-4 weeks, major companies release earnings & guidance early into the season and by 3rd-4th week market pretty much decides on its direction. Based on this information, market should decide its direction by 1st-2nd week of August (end of earnings season). 2nd scenario is very specific to current US economic situation and if not acted upon will crash the markets. US Government is close to reaching its US Debt Limit (US money borrowing power). Think of this as reaching your credit card limit after which you cannot borrow any money from your Credit Card. In this case, the debt limit is imposed by US Congress. Of-course, US Congress is the one who can raise the debt limit as well, which means the House and Senate has to unanimously come to an agreement to raise the debt limit. How this affects our markets?
Sounds very scary! YES it is scary and we cannot do anything about it. But don't panic, most likely US Congress (our politicians) will come to an agreement this or next week about raising our debt limit which will help markets to move up quickly executing another rally. I am Confused!!! So shall we get out of the markets and wait for the rally? or shall I remain invested and exit when it really happens! From BPNYA current chart below, we should be invested for now and if market fails to maintain its uptrend then we can always get out of the markets once we get the SELL signal. We would like you to make your own financial decisions rather than anyone else tell you what to do! The intent of this blog is to make you educated enough to take your financial matters in your own hand and not rely on others.
Remember: Preservation of capital is our top most priority with balanced risk. Comments are closed.
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