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A Tale of Two Market Opinions

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Assessing the bear-market rally.

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There's been a lot of confounding discussion about the fate of the market in the media. And I think I should do my part to add to the confusing mix of thoughts by assessing some market facts and dissecting some indicators and chart patterns.

The good:

  • At 909, the S&P 500 has gained about 21% from closing lows on November 20th. This is really a spectacular gain, prompting some to call this as the start of new cyclical bull (believe it or not!).

  • Not only that, the market has managed to retain most of the gains till now. Another amazing feat.

  • The market has shown remarkable resilience by not crumbling on bad news. On the contrary, the S&P 500 has recently jumped higher despite bad news. This is a very different reaction from October-November, where, like a house of cards, it used to collapse at every hint of bad news, even no news at times.

  • Breadth has been extraordinarily good.

  • Some technical indicators, such as percent of stocks above 40 day moving average, S&P Short Range Oscillator, saw new highs for the first time since the bear market started.

  • Most major indexes remain above their significant 10-, 20- and 50-day moving averages, another sign of short-term strength.
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No positions in stocks mentioned.

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