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Jeff Saut: Will Credit Markets Join the Rally?


Or will the dollar dive stop it in its tracks?

Editor's Note: The following article was written by Raymond James Chief Investment Strategist Jeff Saut. It has been reproduced with permission for the benefit of the Minyanville community.

I, along with everyone else, continue to ask: Is this a bear-market rally, or something more?

I've said that equity markets were likely to bottom the week of March 2, and would stage a pretty decent rally: My oversold indicators were as oversold then as they were at the November stock-market low. Accordingly, I suggested the rally might resemble the one we experienced off of those November 20 lows, when the Dow Jones Industrial Average (DJIA) bottomed, only to rally some 494 points the very next day. On Monday, it gained another 396 points; the following 3 sessions, it went up +36, +247, and +102.

Then on Monday, Madame Death (AKA banking analyst Meredith Whitney, who's been consistently right, by the way) spoke on how much worse the banking complex would get - and the Dow dove 680 points.

However, over the next 5 sessions, the senior index gathered itself together and re-rallied with the next 5-day pattern reading +270, +172, -215, +251, and +298. By the time the buying stampede was over, the DJIA had gained over 20%.

If this is indeed another buying stampede, it began on March 9, making today's session 11 in the typical 17-25 day upside binge. Recall that such stampedes are only interrupted by 1 to 3 session pauses/corrections before resuming. Therefore, it's important for the equity markets to re-rally today or tomorrow.

That being said, the easy trading money has already been made with the S&P 500 (SPX) up over 20% from its recent lows. Moreover, the rally has driven the SPX up to its 50-day moving average (DMA) at 804, which was a logical spot for stocks to pause/correct. I would only add to my trading positions if there were a downside "bump" like the one induced by Meredith Whitney.
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No positions in stocks mentioned.
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