4/5/2018 Trump threatening China again and the market doesn’t like it.

Fun Fact #20

Did you know that on October 19, 1989, the Dow Jones plunged 22.61% in a single day? This day was known as “Black Monday.” 

You can read more about that here: https://en.wikipedia.org/wiki/Black_Monday_(1987)


 

4_5_2018 Market Stocks.PNG

We had a green day as expected, but after Trump proposed new tariffs on China worth $100 billion, the market sold off hard. The FAANG stocks are all down about 2%. Yesterday we had a big gap down on the trade war news, but closed the day up a lot. Could the same thing happen again this time?

There is no point in posting/discussing charts today since they are meaningless with stocks down so much in afterhours. 

Something interesting to discuss is this week’s sentiment. Please click the link below to follow along.

http://www.aaii.com/sentimentsurvey

Bearish sentiment is now at the highest reading within the last 7 months. Most people use the AAII indicator as a contrarian indicator, meaning you bet against it.

The idea is that if everyone is bearish and negative about the future price movement of stocks, they’ve already sold or are selling short. This means that there are no longer any sellers left, and the only direction stocks can go is up. You can also use this for when everyone is optimistic on the direction of stocks. In late January this year, during the 10% rally upwards, the sentiment reading was at the highest level in 5 years or so. This meant that all the buyers already bought. Thus, the price could only go down as a result. 

 

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