Snapback Rally - One Of The Best Ever

Snapback Rally - Another Big Rally

The stock market is overbought, and the economic reports are missing estimates. Earnings estimates have fallen to the point where 1st half results are expected to barely show any growth. But stocks still roared higher on Friday. 

Bullish investors see a scenario where economic growth recovers as the Fed has stopped pressing on the breaks because inflation is modest. 

Investors also know the negative sentiment indicators will reverse. Especially now that stocks have rallied, the shutdown is over, and the worst fears about the trade war have been allayed.

Snapback Rally - The Bears Are Pressing Their Luck

On Friday, S&P 500 was up 1.09%, Nasdaq was up 0.61%, Russell 2000 was up 1.56%. VIX was down 8.08%. The S&P 500 is now up 18.1% since the Christmas Eve bottom and only down 5.3% from the record high in September. 

Even though it doesn’t seem like it because stocks are rallying, bears are pressing their luck, trying to profit off a second leg lower. 

They really think the September record high will hold. I thought it would too, but I reconsidered my position after I reviewed the latest revenue growth estimates. Usually, revenue growth is lower than EPS growth, but not in this case.

Snapback Rally - Best Rally Since WWII

S&P 500 is now up an astounding 10.72% year to date. This is one of the fiercest rallies I’ve seen in my life. 

The CNN fear and greed index increased from 65 to 70 which is the highest reading since the recovery rally started.

As you can see from the chart below, the S&P 500 is up the most out of all the 3-month drawdowns of +20% since WWII. 

This chart ends on February 11th. Since then, the S&P 500 is up 2.42%. In 119 years of Dow Jones Industrials history, it has swung from a 52 week low to an 8 week winning streak of 15% or more twice. 

The first was November 2002 and the second was now. This shows how rare and severe this rally has been. 

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