drewtalksmoney

The past week has been hectic for the stock market as a whole. Warning signs as blaring as stocks are entering a correction phase.

The housing market provides an early indicator for fundamental market trends. On this note, the housing market saw a 4.6% decline last week even as we begin entering a traditionally busy season for the housing market. The reason for this is clear. Trump’s tariff plans on Canada, Mexico and China are resulting in high levels of uncertainty among investors. This will have implications on the retail sector as demonstrated by the dip of the retail sector ETF (XRT). In an environment where consumers are fearful, good buying opportunities are created.

Major technical warnings have also been raised; the S&P 500 has adopted negative momentum as investors begin dumping shares over this uncertainty. The Magnificent Seven are all trading below their 50-day moving averages; a sign that stocks may be headed towards a greater correction. Many of these Mag7 stocks could potentially dip below the 200-day moving average, a psychological important price level. A breach of this would probably result in further market wide selling.

I believe that this healthy correction is much needed by the market especially since stocks have rallied dramatically after the Trump election. Whilst I believe you should keep your holdings for the long run, you can hedge your portfolio using an inverse ETF, such as the Ultrashort QQQ ETF. As always, it is important to remain diligent and do proper research on stocks.