Stocks fell sharply on Wednesday – then they gained it all back, and even rose a little further, on Thursday.
Ostensibly, that was because the Turkey crisis deepened on Wednesday and was resolved on Thursday.
The market’s gyrations are enough to make your head spin.
And so are the changing stories.
But I don’t buy them.
The chart shows us several things.
One, the year to year increase was 1%, which is hardly the 6% annual rate implied by the headline number.
Two, recovery actually stalled in 2015.
Three, despite the massive tax cut enacted in February, the minuscule gain this year is no faster than it was a year ago.
And four, real sales per capita have yet to exceed the level reached in 2005 despite 9 years of recovery.
This is essentially what the tax data for July had told us, but nobody looks at the truth. The Fed and everybody else are looking at the headline numbers, not the facts.
The market can’t handle the truth. So the big speculators borrow money to support high stock prices.
Eventually the truth will out, and the market will react with shock.
Can I pinpoint when that will be? Apparently not. But I’m still recommending staying out of the market.
I’d buy a few calls to hedge and participate in any upside, with limited risk, if the market breaks through 2850.
I would go the other way and buy puts to take advantage of the downside when the market breaks down below 2800.