Stock market

Elliott Wave Options: S&P Worries Inflation Too Hot! … Correction Coming?

Last week’s economic data showed that both consumer and producer inflation is staying higher than expected. That’s a concern for the market, as declining inflation is key for interest rates to come down later in the year.

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  • Meanwhile, markets have fared well in the first few weeks of 2024, with the S&P 500 breaking to a new all-time high over 5,000. That move may not last, as the latest data could mean a pullback is ahead.

    If such a pullback does play out in the next few weeks, it will be in line with market seasonality. The back half of February, and most of March, is often a poorly-performing time for stocks, as earnings season winds down.

    The headline inflation data can give the market an explanation for this seasonal decline. From a technical perspective, stocks have been trending higher in overbought territory for weeks.

    Both of those signal that a small pullback could be a good thing for investors. Those who have missed out on the market’s recent run should get the chance to make additional buys in the coming weeks.

    A market correction this time of year is typically in the 5-10 percent range. That should be enough for more volatile positions to see an even steeper drop before they start to turn around and head higher.

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