Last week the market closed down despite the Fed printing over $100 billion and handing it out to Wall Street.

The weakness continues this week. As I write this Thursday morning, the market is down for the week. And this is happening despite the fact that both Fed Chair Jerome Powell and Treasury Secretary Janet Yellen issued extremely dovish statements to the Senate Banking committee.

Put another way, stocks are falling despite both incredible liquidity and incredible verbal interventions. This is very bearish. And it opens the door to a significant drop lower at month’s end.

The first quarter of 2021 ends next Wednesday. At the end of each quarter, large financial institutions need to rebalance their portfolios (most maintain a 60/40 split between stocks and bonds).

JP Morgan has estimated that this particular quarter’s rebalancing will involve institutions dumping over $300 BILLION in stocks.

Put another way, the markets, which are already weak, are about to be hit with a tremendous amount of selling pressure. The door is open for a significant drop here. I’ve drawn the key support levels for the S&P 500 in the chart below:

Try to control your emotions during this pullback and focus on the levels. You can also draw up a list of the companies you want to buy during this pullback along with the levels at which you want to buy them.

I’ve said it to you before, investing is all about strategy and risk management. Let the market work for you, instead of the other way around.

Best Regards,

Graham Summers
Editor, Money & Crisis