Transcript
Hello, everybody, welcome to Friday. Unfortunately, it’s a Red Shirt Day today, the S&P 500 was down almost 2%. In total, there were some important pieces that happened today that I think are worth looking at. Let me share my screen here real quickly. So again, this is the Vanguard S&P 500 ETF VOO, we talked about this last couple of days. And you can see we have an all time high here.
Then a couple days ago, we had a pretty good down day, I said, once we had that it’s kind of having like a leg wound, you know, the market can’t run again, it’s not going to go straight back up. I told you yesterday that I thought it would come down, you know, I told you the other day that I thought it would come down to this level. And that’s exactly where we’ve come. So now it’s this is an important level, we’re down about 5%, you know, once you get down to this purple line here, and that’s very normal, down in this range is the 10%. And one of the issues that we are looking at here is that there’s not as much support underneath where we are right now, when you run straight up like this, you don’t spend much time at any one of the prices.
So we’ve got a, you know, a fair low support level there. So we could fall farther if we get through this. You know, and I’m not too worried about that this was a 10% downturn that turned into a fantastic run. So again, these downturns are very normal, we’ve now gone sideways for the Month of January, essentially in the S&P 500. That’s a good thing. We’ve built this big base here, be nice to stay above it and you know, kind of run up and then we’d have that to fall back on. But even if we fall back down, we’ll start to refill in some of this. And like we did here, the more base we can build underneath the price, the safer the market gets to a certain degree. And so I have no problem with what’s happening here. Please keep in mind that the structure, the bones of this market are one of the best I’ve ever seen. And they’re still there, you have zero interest rates, the 10-year treasuries that just barely over 1%, the 30-year treasuries at 1.8%.
That’s not going to attract a lot of money away from the stock market, it’s actually going to push money into the stock market. You know, banks aren’t paying anything, money markets aren’t paying anything, et cetera. That’s a really big deal. The vaccine is here seems to be working, it’s coming out slowly. If comes out quickly, that’d be great. But it’s it’s moving along. If that works, then we get this pent up demand coming out. And then we got the real big piece, which is this $1.9 trillion additional stimulus that’s talking about putting out even as early as next week, which could turn this market around quite dramatically if they do do that.
So I think, you know, things are fine. This is a normal part of the process. And I think this is what we need to have happen. If we’re going to have a great 2021 for the stock market, we need to build these bases. And we need to create this support level below that, so that there’s some logic to it, instead of just stretching up forever, you know what I think one of the biggest dangers is to really, really, really stretch up because the snapback and create a panic, and then people just really, you know, it turns into a 10 to 20% downturn, you know, instead of a 5 to 10% downturn. So I think this is a healthy piece. It makes me feel okay about what’s happening. Let’s see what happens on Monday. I think this is a very fascinating time to be watching what’s going to happen going forward. Thank you very much.