Title: Market Analyst Predicts Choppy Weakness in Stocks Due to Liquidity Concerns
In a recent market report, Tom McClellan, a long-term bull and editor of The McClellan Market Report, has raised concerns about liquidity issues that could lead to a period of choppy weakness in the stock market for the next 6 to 7 weeks. Despite this short-term bearish outlook, McClellan maintains his long-term bullish stance and predicts a recovery with “probably new highs” after a dip in mid-April.
McClellan’s analysis is based on monitoring banks’ positioning in the interest-rate futures markets, particularly the Secured Overnight Financing Rate (SOFR) through the Commitment of Traders (COT) report. According to his model, big-bank commercial traders are currently net short on SOFR futures, indicating a potential drain in market liquidity that could put pressure on the stock market.
The recent sharp selloff in the S&P 500, coupled with signs of negative divergence in technical indicators, has further supported McClellan’s bearish outlook. He believes that the liquidity impact will be amplified as the tax-deadline day approaches, with investors facing higher-than-normal taxes on April 15.
While McClellan does not provide a specific point or percentage-decline target for the S&P 500 during this period, he emphasizes the importance of timing in his analysis. He expects the decline to be choppy, with minor bottoms and tops before a final decline to mid-April.
Overall, McClellan’s insights highlight the potential impact of liquidity concerns on the stock market and provide a cautionary outlook for investors in the coming weeks. Stay tuned for further updates on market developments as the situation unfolds.
By Tomi Kilgore
Published on MarketWatch, operated by Dow Jones & Co. Independently published from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
03-06-24 1413ET
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