11 Dec Stock Market Takes Strong Bounce Higher
In perfect textbook fashion, stocks took a strong bounce higher yesterday after hitting the significant floor of support we have talked about in recent market updates. The bounce was strong enough to erase a nearly 500-point drop in the DOW. The upward momentum is still strong this morning, as markets continue to climb higher once again today. Although this is purely a technical move higher, investors are crediting improved relations between the US and China. However, the stock market would have bounced off this floor regardless. It will likely take something very negative in the economy or in the on-going saga regarding President Trump to push stocks below this level.
The upward momentum in the US stock market is in no way a sign that stocks are out of the woods. Even in a falling trend, markets will pause and regain some of their losses before making another run lower. Increased volatility is often associated with markets entering a bear market. Clearly, we have recently experienced an uptick in volatility. Although most economists don’t yet see a recession as imminent, I strongly believe that we are now in the early stages of a downturn. Even looking back on history, the bond markets inverted in 2005. For many, that is a definite indicator if a recession to come. Most didn’t see the extent of what was coming until it was well underway, with much of the impact still unknown until 2008.
We will maintain our locking bias.