THE VIRTUS VIEW

Is The Bull Market Over?

Investors, in general, were glad to see the victory by the Republicans in the race for the Massachusetts Senate seat. The market likes gridlock and the win by Brown gave hope that President Obama, due to the Democrats loss, might reflect on his drop in approval ratings and his falling support for his health care plan and encourage him to move more to the middle. It happened with then President Bill Clinton in 1994 and Wall Street hoped it would happen again with President Obama.

Unfortunately for investors, President Obama came out swinging. His focus on banking, at a time when credit is still tight and lending is not at a point to maintain, much less grow an economy was not received well by the markets. A recent Bloomberg survey showed that 77% of those polled believe the President is anti-business. Add to that the unfortunate timing of China announcing it was cooling down its economy and you have a recipe for a volatile market. And that is what we had last week when the S&P 500 dropped over 5% for the week. 

Although President Obama spoke to the need for both parties working together during his State of the Union speech, it did not appear investors bought it as the market was down the next day by over 1%. No one knows if President Obama will move more to the middle, and it appears to be a stretch to think he will, and this uncertainty is not good for the market.

So where do we go from here? Although some claim they can call a top to a rally, bull and bear markets turn on little if any notice. A short-term correction and the start of a bear market look the same at first. We do not want to over-react to every correction.  With that said, we might have hit an intermediate term top after President Obama came out targeting the banks. As stated above, it does not appear investors were calmed by President Obama’s State of the Union. Add to that China’s announcement that they would be slowing the growth of their economy and you have a nervous market. 

Look for the S&P 500 to test the 1040 range short-term. Either at that point or before, the S&P 500 may bounce back to the 1110-1120 range. If we can break through that, technical analysis shows we may test the high of 1148. If we do not break through 1110-1120, the market may see 980 again. Depending on your investment objectives, you may wish to protect against further downside. There are many strategies to protecting downside; we can discuss them as they pertain to your individual situation.

Be careful out there, it is very hard sometimes to tell the difference between a short-term healthy correction versus a new bear market. We shall find out soon I believe.

 

Best Regards,

 

Brian C. Tillotson

Wealth Manager

Virtus Wealth Management

2435 E. Southlake Blvd

Suite 120

Southlake, TX 76092

 

Phone Numbers:

817-717-3812

866-407-4320

 

www.virtuswealth.com

 

 

 

Past performance does not guarantee future performance.

 

 

Securities and Advisory Services offered through VSR Financial Services, Inc. a Registered Investment Adviser and Member FINRA / SIPC

Virtus Wealth Management is independent of VSR

The attached commentary contains opinions and analysis that are provided by the author for informational purposes only and should not be used as the primary basis for an investment decision.  Technical analysis relies on past performance; which cannot guarantee future results. Nothing in the Virtus View should be taken as a recommendation; this has been a general explanation of these trends.

 

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