S&P 500, Time to GTFO?Buy volume since the beginning of the year has dramatically decreased (#1), and price pressure is showing a bearish divergence (#2) in the third screen . At first I was somewhat confused how price was attempting to breakout again- facing a strong resistance area (previous ATH set in Jan), while buy volume has decreased a lot compared to the volume of buying seen in Dec-January time roughly 8 months ago, which was S&P500's buy volume when it reached it's all time high price (ATH). This baffled me months ago. However, recently it was disclosed through varies media sources(1), that companies have been buying back their own shares at a remarkable amount. This action was conducted in hopes of maintaining current high evaluations. The specific reasons could range anywhere from: A) The bull market run we have seen for the past two years, shortly after Trump was elected(2) is starting to slow down and head for a correction or is trying to maintain itself until a series of new buyers enter in. B) Uncertainty of the markets direction with regards to policies and regulations due to upcoming midterms(3). C) A natural Sector Rotation taking place(4).
Upon reviewing all the information currently available it is my believe that the only thing keeping the stock market afloat right now are the corporate buy backs.
(1) Media Sources: www.cnbc.com , www.cnbc.com , www.cnbc.com , money.cnn.com
(2) Markets are driven by various key factors, one primary factor being confidence. Trump being the 'Big Money' President once elected officially into executive office has clearly generated market confidence once again within the US Market. Running on a platform the promised economic Tax Cuts for the citizens of U.S. and Corporations combined with a promise to decrease rules & regulations, thus providing corporate america with more flexibility.
(3) The Democratic party which could potentially win the majority in either or both the House & Senate in the upcoming months may have the markets worried. This worry could stem from the Democratic platform of wanting higher minimum wages, more taxes towards corporations, and/or changes in regulations which could potentially impact corporate america.
(4) Sector Rotation is the act of moving one's profits made in one area of the market, for this example let us use Nasdaq which is primarily composed of Tech companies (Nasdaq is also suffering same problem as S&P 500, albeit to a different degree) which have witnesses a great price increase the past few years, to areas in the market that haven't such as singular Energy corporations. The act of 'profit taking'. Money never leaves the market, it is simply re-invested into areas with higher earning potential. *I do understand that I have compared an Index to a singular, that said it was merely to explain here in very basic ideas what sector rotations is*
