In addition to Nasdaq and Draghi ramp up yesterday, China has decided to cut interest rates. Because, you know, everything is so awesome.
Further, by this point most investors are 100% confident that the correction is over and that we are back on bullish track. WSJ: Dow, S&P 500 About to Exit Correction Territory
I wouldn’t be so fast to come to such a conclusion. For the following reasons.
- The market left behind a number of massive up gaps (including today). Gaps it will have to close sooner or later.
- We are witnessing extremely overbought conditions and quite a few technical divergences.
- Previous market leaders are not confirming. For instance, the Dow Transports, Russell 2000, Biotech (IBB) are all sitting close the their respective lows. That shouldn’t be happening in a broad “bull”. But who knows, maybe they will pay catch up….right???
- The angular rise thus far, off of August 24th low, has been an incredible 83 degrees. And even more incredible 87 degrees off of September 29th bottom. Add 3 more degrees and forget about the Dow 20K, it will be a straight shot to the moon at that point. Meaning, such sharp moves are corrective in nature, not structural.
- Etc…..
That begs the question, is this a new bull market or are we witnessing the mother of all short squeezes/bounces. Time will tell, but I wouldn’t necessarily jump to a conclusion that we are back in a bull market.
