Gone is the euphoria
While the bears are celebrating the increase in rate hike expectations, it is important to note that a significant market correction has been long overdue. Two of the 10 best-performing S&P 500 components in the last 30 days are unprofitable, while the remaining 8 have an average price/earnings ratio of 52.73 (or 24.53 if the highest value is excluded). Unless the after-tax corporate earnings continue their 2-quarter winning streak, the market might get even more overvalued in the nearest future.
Falling below its 50-day moving average, the S&P 500 has demonstrated a weakness that might easily continue in the coming weeks.
Source: StockCharts.com
Now, let's sum it all up and reassess the market's near-term potential. The events that might lead to a weaker short-term market performance include (but are not limited to) the following:
- The North Korea nuclear test that was announced on Friday -