Why the stock market is due for ‘consolidation’ as Trump takes aim at China - MarketWatch

stocks, rising tensions between Washington and Beijing could spark a round of near-term consolidation that could prove to be an entry point for investors, a prominent Wall Street bull said Friday.

Read:The stock market has been rising — is that why Trump is attacking China?

Dwyer on Tuesday urged investors to adopt a more offensive posture as stocks broke out of the trading range that held since early April, followed by a Wednesday note that acknowledged the strength of the market’s upside move and a bout of “extreme rotation” into previously lagging sectors, including financials, could lead to a period of consolidation.

Citing research from Sundial Capital, Dwyer noted that when the S&P 500 goes from periods of extreme weakness, with less than 10% of stocks above their 50-day moving average, to a situation where more than 90% trade above that level, the market tends to consistently show strength over 3-, 6- and 12-month periods, albeit with bouts of near-term consolidation (see chart below).

Dwyer said near-term consolidation would likely present an “entry-point opportunity.” Meanwhile, “it appears the president might be giving the market the excuse for that consolidation opportunity over coming weeks,” he said.

Based in New York, Watts writes about stocks, bonds, currencies and commodities, including oil.

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