THE STOCK MARKET MIGHT RETEST ITS MARCH LOWS
Yesterday’s steep drop in oil prices will inevitably take stock prices down, and not just for one day. I’m estimating that we’ll see U.S. stock markets trade back down to their March lows in the coming days.
I was shocked to see on social media that people were not comprehending why oil prices had fallen, with many folks assuming that the situation was related to the tension between Saudi Arabia and Russia that had developed many weeks ago. As you may recall, that situation was resolved recently when most oil-producing countries agreed to production cuts.
The current drop in oil prices has everything to do with the global economic lockdown. If people are not working and driving cars, and businesses are not up and running, and airplanes are not flying, there is going to be far less demand for oil. When demand drops for a product, the price of that product declines.
The only solution that I can foresee to stabilizing and healing oil markets is for global Heads of States and U.S. Governors to reopen their economies and allow people to go back to work. I’m sure these “leaders” are finally realizing the damage that they’ve done, and that they will respond accordingly.
HOW TO PROCEED WITH YOUR STOCKS
No matter how much the stock market might fall today, this will not likely be a one-day drop. It’s extremely hard to know, so I’m running on instinct and experience here. Here are three potential courses of action:
1. You could ride out this stock market drop, and simply await the rebound.
2. You could buy investments that rise as the market falls, such as Direxion Daily S&P 500 Bear 3X Shares (SPXS) – an ETF that we’d been invested in during the March market drop.
3. You could sell shares of stock and wait to buy low once stocks stabilize again.
I am overwhelmed with work this morning, and I therefore won’t be able to help you select which of your stocks that you might sell, in scenario #3. Tomorrow’s Weekly Update won’t have additional information on the topic, since we’ll really only be a few hours into this new market downturn when I send the Update to the editors today.
The only additional course of action that I can think of, if you are so inclined, is to phone your U.S. state’s Governor’s office and demand that they allow businesses to reopen. They DO hear your voices. There IS a threshold at which you can no longer be ignored, and we might be hitting that threshold now.