Articles

Just a bounce?

Today’s market rally based on news that the Iran conflict may end soon, is the best one day move since May of last year. Typically when we are in a market correction, any bounce may get sold as part of the bottom testing that has to happen before a recovery can begin and be sustainable. Today’s move takes us higher than the highs of the last two days, and has accelerated rather than being sold. Obviously as the market is currently reacting to the news of the day and the price of oil, the recovery may not be immediately ahead of us, but the underlying fundamentals remain strong and we expect the market to do well once some of the uncertainty is mitigated.
The major indicis are below their respective 200-day moving average, but are close to regaining that level. In the past, if the S&P500 can ascend back above the 200-day moving average within 30-days of breaching it, the market is higher 100% of the time a year later with an average gain of about 19%. We do expect the market to focus on the fundamentals again soon rather than being traded based on pure sentiment. We expect the typical V-Bottom and believe patience will be rewarded.

Comments are closed.