With back to back rallies to start the week, we have now rallied 23% from the March 23rd lows of 2,191.86 (for the S&P 500). Is this the start of a new bull market, or is this just a bear market rally within the broader confines of the bear market? Keep in mind that we are still roughly -20% lower off the all-time high for the S&P 500, which puts us solidly in the middle of the range.
All three major indexes triggered new green weekly Trade Triangles indicating that the overall market has moved into a sidelines trend or sideways momentum as the figures above would suggest. So where do we go from here?
Honestly, I don't have a clue, and I don't think anyone else does either, but we do have the Trade Triangles to guide the way. My inclination, if I had to guess, would be that we'll continue to see high volatility as Coronavirus news will drive this market for good or bad.
Here are a couple of things to consider:
1. This two-day rally is solely based on slightly improving Coronavirus numbers. In the U.S., the number of reported new cases appears to have fallen somewhat from their recent peak, indicating that the curve may be flattening. Italy and Spain, which are two of the hardest-hit countries, are also reporting that the number of new cases is tapering.
2. We're still a few weeks or more from opening the economy both here in the U.S. and globally. This will continue to put pressure on businesses to survive and prolongs the workforce from getting back to work.
3. And this is the big one. We have yet to see the impact that this global shutdown will have on corporate earnings. Once those numbers start rolling in, we could be in for extreme volatility, which could lead to a big mover lower.
Overall, we have a long way to go to see if this a bull market or a bear market. I'd suggest letting MarketClub and the Trade Triangles tell you what to do, that way you can sleep easy at night!