Last week’s Capital Wave Forecast was a hard break from the bullish stance we’ve been enjoying.
I said on Tuesday, “This Capital Wave Forecast is your first warning. Markets are overly optimistic, have risen too far too fast, and are prone to a correction in the coming weeks.”
That abrupt turnaround last week came on the heels of a long weekend of research into how high and how fast benchmarks had moved up in the face of the coronavirus spreading, as opposed to the fake news out of China that infection rates were slowing.
Equities were moving higher in anticipation of a quick resolution to the spreading virus, mostly fueled by new cash plowing into “passive” funds.
That worked…until it didn’t.
Today’s forecast is your second warning…
In this week’s Capital Wave Forecast – published Tuesday because Monday was President’s Day – right up top, out front, out loud, and against a very, very long string of very bullish Forecasts, I declared, “This Capital Wave Forecast is your first warning. Markets are overly optimistic, have risen too far too fast, and are prone to a correction in the coming weeks.”
Without hesitation (Wednesday’s dead cat bounce notwithstanding), it’s begun.
Right now, we’re seeing profit-taking.
If there isn’t positive news on the spreading coronavirus, named Covid-19, we’ll see net selling.
In the course of another couple of weeks, if we don’t see actual proof that infection rates are slowing and deaths don’t start declining, we’ll see bouts of panic selling which could, in short order, foster a correction – potentially taking markets down 20%.
From there, it all depends on the virus.
But you don’t need to sit idly by. This is what I would recommend doing to protect and profit in the face of the threat…