By Gregory Mannarino
Markets rise and markets fall—understanding what is normal, and what isn’t.
Markets in aggregate derive their value off of action in the debt market, and despite the recent NORMAL volatility which we have seen in the equity markets as of late—the debt market remains stable.
For the stock market to “crash,” we would need to see instability in the debt market—which is just not there right now.
I believe that the issue today is people are just not used to seeing normal market pullbacks and corrections, which do occur from time to time. 
Therefore, when people experience normal price fluctuations, they get fearful. 
However, this coming week can be thought of in some ways as a MAKE-OR-BREAK moment for the market as the Fed is expected to raise rates. In my opinion a Fed rate hike will prove to be bullish for stocks. For weeks now the market has been pricing in a Fed rate hike, and that has caused increased volatility. Generally, when the market “prices in” an event like a rate hike and then gets one, stocks respond in a positive way.
What appears as rising tension between Russia and Ukraine is another uncertainty for the market, and the market HATES uncertainty. If in fact an invasion scenario by Russia into Ukraine does occur, I would expect that global stock markets will fall however, energy and crude oil prices will skyrocket. 
If we realize that the big market event/stock market collapse everyone is anticipating will be the result of a debt market implosion, meaning a situation where debt sells off and things like the US 10-year yield spikes in an uncontrolled fashion, then by just following say the US 10-year yield, will give us a BIG heads up on whether THE BIG ONE is happening or not at any given time. 
THE key to being a steady/long term stock market investor/trader is to not get rattled, and you do this by simply understanding market dynamics—and the key to that, is by realizing that the stock market IS A DERIVATIVE of action in the debt market. Other keys to how stocks will perform is the relative strength of the dollar, or by following the DXY/dollar index. Also, by following crude oil- which is the lifeblood of the market.

Comments are closed.

Skip to content