My wife told me she heard the stock market was about to crash.
It was Tuesday morning. The S&P 500 had taken out Monday’s low and was trading near 5550. It looked like stocks were heading over a cliff, and capitalism was dying.
Gabriela entered my office and asked me a question she has NEVER asked in our entire 32 years together…
“How does the market look today?”
From anyone else, this is a reasonable question. After all, the stock market is my “gig.” And, with the wild volatility of late, my opinion might be of some value.
But, as any married man can attest, the husband’s opinion is rarely requested.
“Why would you ask me that?” I responded.
“Well,” Gabriela replied, “I heard the market was about to crash. So, I wanted to check and see if it was happening today.”
That can only mean one thing…
The thought of a crashing stock market has become so “mainstream” it is being discussed on the various “Housewives” shows on the BRAVO network.
Don’t get me wrong… Gabriela is wicked smart. She runs a wildly successful company. She can debate on any number of complicated issues.
But, she doesn’t follow the stock market. And, she hardly ever expresses a market-related opinion to me.
So, if she’s commenting on the market right now, it’s because whatever is happening is being talked about on one of Gabriela’s guilty pleasures – either mind-numbing television shows, or mind-numbing Instagram postings.
And, it is a fantastic contrary indicator.
If a market belief has become so prevalent that even my wife is talking about it, then it is a sure-fire sign we’ve ventured into “extreme territory” and we’re on the cusp of a reversal.
The S&P 500 traded as low as 5530 on Tuesday.
At that point, the index was down 10% from the February high – putting it in “correction” territory. We now have extremely oversold technical conditions.
Investor sentiment, a contrary indicator, is as bearish as it has been since the Covid-inspired correction of 2020.
The Volatility Index has generated a cluster of five buy signals in just the past two weeks. We’re entering the seasonally bullish period of the second half of March.
And, Gabriela heard the stock market is about to crash.
It looks to me like everything is lining up for one heck of an oversold bounce.
Best regards and good trading,
Jeff Clark
Editor, Market Minute
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