Stocks are ending the week on a sour note after experiencing a three-day rally mid-week that saw the three major indexes gain upwards of +13%. But was this a bear market rally? Or can the upward momentum continue?
What is a bear market rally, you ask? A bear market rally is a sharp short-term increase over days to weeks within a longer-term bear market. Often investors will see this short rally and think that a bottom has been put in and that the bear market is over. However, investors should be cautious as the downward market action will often return, catching investors out.
You may know these rallies by other names such as a "Sucker Rally" or a "Dead Cat Bounce."
The bear market rallies that began in 2000 and 2007 both gained more than 20% before coming to an end. The most massive bear market rally came during the bear market of 1937 when stocks rallied more than 60% before falling again. With that in mind, I would preach caution if you are actively trading.
Back to the indexes, the DOW has been down over -3% on the day, with the S&P 500 losing -2.7% and the NASDAQ losing roughly -2.7%. However, all three indexes will post weekly gains of +13%, +10%, and +9%, respectively.
The dollar has come under pressure after having a stellar run last week to lose -3% for the week and trading back below the 100 level at 98.8.
Gold and crude oil have effectively swapped places this week with gold gaining +8% and crude oil losing -8% for the week, trading at roughly $21 a barrel. You may have noticed that gas is now below $2 a gallon in your area, or it's steeply lower than it has been in recent memory.
Then we come to bitcoin, which will have back to back weekly gains with a gain of +5% this week trading back above the $6,000 level.
Key Levels To Watch Next Week:
- S&P 500 (CME:SP500): 2,882.59
- Dow (INDEX:DJI): 25,020.99
- NASDAQ (NASDAQ:COMP): 8,347.40
- U.S. Dollar (ICE:DX): 94.88
- Gold (NYMEX:GC.J20): 1,647.20
- Crude Oil (NYMEX:CL.K20): 24.65
- Bitcoin (BITCOIN:BITSTAMPUSD): 8,771.05