Market volatility soars as UK and Apple deliver more negative news
The market has been in free fall since the hotter than expected August Consumer Price Index report on September 13. Interest rates have risen steadily, the Fed remains steadfastly hawkish, and concerns about a slowing economy have grown.
Adding to these factors, the UK has experienced unprecedented economic chaos as the new Prime Minister tries to tackle inflation and slowing economic growth. On Wednesday morning, UK bonds tumbled ahead of news that the Bank of England would immediately start buying long-term UK government bonds to stabilize the market.
US futures recovered much of the losses overnight, but there is also news that Apple (AAPL) has canceled a production increase of its new iPhone due to slowing demand. Apple has shown strong relative strength recently and been a safe haven in this chaotic market, but it’s listed down around 3.5% pre-market here on Wednesday.
For a few weeks now, traders have been anxiously trying to catch an oversold bounce or countertrend move. The idea is that stocks are very oversold and the mood extremely negative, which would lead to a relief bounce.
The stock pattern was an early strength that quickly sold out and a poor close. Strong starts and weak closes are classic symptoms of a bear market, and there’s no doubt that we’re buried there right now.
Negative news from the UK and Apple could finally help create the conditions for a better rebound. Tech support in indexes failed and news is about as ugly as it gets. Too many bulls have been hoping the worst has already been priced in by this market, but now there’s a better chance that this is the case as we are hit with the ugly headlines this morning.
If you’re a longer-term investor, none of this matters much right now. The market is under heavy pressure, and even if there is a relief rebound, there is no reason to rush out and put precious capital to work. It will take some time for market conditions to improve, and once they do, there will be plenty of time to create positions in your favorite names. There is absolutely no reason to buy into the teeth of a decline. You won’t miss a thing if you don’t buy today.
If you are a trader, the increased volatility and news flow is likely to create opportunities for quick trades. Just be clear about deadlines and handle transactions carefully. We are experiencing some very unusual events, and we are going to have big moves in both directions as they unfold.
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