A Bear Walks Into A Bar

After taking a few days off, I saw that the Russell 2000 IWM closed at 164.88 a week ago, marginally hanging onto its 50-Daily Moving Average.

Then, Monday the 10th, IWM had an inside day.

Tuesday, it gapped higher.

Thursday it broke from its 5-day trading range to the upside.

And Friday, IWM sold off, yet maintained an inside day to Thursday’s trading range.

In fact, the Nasdaq 100 and S&P 500 also had inside trading days.

Only the Dow broke last Thursday’s low on Friday, after it had made a new all-time high.

So, a bear did indeed walk into a bar, but did his boot kickin’ whiskey inspire or hamper him?

The level of resiliency in the market is in a word-astonishing!

Consider:

  1. The artificial stimulus by the Central Banks,
  2. The relatively weak earnings quarter with few exceptions,
  3. The low corporate tax rate which has incentified corporations to continually buy back their own stocks.
  4. The unknown global effect from the coronavirus,
  5. The geopolitical unrest throughout the world and technically,
  6. A few bearish signals from certain cyclical sectors,
  7. And the top one-The White House’s consideration to offer tax incentives for more Americans to buy stocks.

The bulls have some good arguments.

All one needs to do is see the Central Banks policy, corporate buybacks, and the sidelined cash with nowhere else to go as sound reasons to think the market will never correct.

Heck, even Berkshire Hathaway finally threw in the towel and bought S&Ps, Kroger and Biogen stocks.

Also to consider:

Junk bonds or the ETF JNK recaptured the pivotal 110 level.

The volatility index or VXX reflects very little fear.

Plus, even with the inside day, IWM did close up week to week.

And the government?

Well that’s a first. I remember the Bush administration urging Americans to shop after 9/11.

But that is a far cry from offering tax incentives for those who buy stocks. That is no better than an inexperienced financial planner telling their clients that the market always comes back and never stays down too long.

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