In this article I would like to outline several market dynamics that are in play right now which present opportunity in the week ahead, I would also like to take a quick look at several things which need to happen for stocks to make another leg higher.
As I have been outlining since the end of last week, I believe we need to be betting against the financial sector as the yield curve continues to flatten out, and the US dollar continues to weaken.
Cash continues to make its way over into the debt market, (despite the Federal Reserve attempting to raise rates) and this is a big tell that stocks overall may soon fall under pressure.
I also believe we are going to see a rebound with regard to the price action of gold and silver.
With Stocks near all time record highs, and the fear Index near all time record lows, this may just be a harbinger that stocks my soon be in for a significant, and needed, correction.
The fact of the matter is simple. In order for stocks to move meaningfully higher we need to see a correction, as the market has gotten way ahead of itself in my opinion. Moreover, we need to see cash coming out of the bond market, not into it, making its way into equities. The fact is with the continued flow of cash into debt, and the stock market hovering your all-time record highs, something will give.
The most healthy thing that could happen to this market, and should happen, is a correction in stocks which would be a set up for a new leg higher.
Gregory Mannarino
