Bear Market Rally

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S&P 500 turned the corner, yields peaked for now, and the dollar likewise. The risk-on sentiment is ruling the day, with value outperforming tech – but at least the latter is also recovering. Stocks though haven‘t turned the corner in earnest, no matter the gains they‘re still about to clock in. Enjoy the rally while it lasts (long entry is a matter of individual trade‘s risk-reward ratio) – more than a few good percent are still ahead before the fresh downleg strikes.

You can look forward to tomorrow‘s extensive analysis, where I‘ll examine the Fed and macroeconomics in the weeks and months ahead vs. the turnaround sequence discussed three weeks ago – unfolding like clockwork.

Here‘s a quote from tomorrow‘s article:

(…) I don‘t think we‘re looking at a fresh uptrend, there is still much stress (to be reflected in stock prices) in the consumer arena.

For now, the key question is the degree to which VIX calms down – would it be able to keep below 23-24 to extend the shelf life of this rally? And for how long would the lull in volatility last? I think the answer is a few short weeks before it becomes obvious that the fundamentals haven‘t changed. The consumer remains in poor shape, inflation would remain stubbornly high (even as it had indeed peaked), and the credit default swaps for quite a few (consumer sensitive) companies are rising relentlessly, which isn‘t yet reflected in underlying stock prices. I‘m talking financials too – this broad stock market rally has more than a couple of percents higher to go before the weight pulls it back down, and earnings estimates get downgraded again.

Stayed tuned for more, enjoy and profit along!

Happy extended weekend.