A large number of investors, talking media heads, and Wall Street analysts are predicting that the US toward another recession. Even the mention of the 'R' word (recession) sends fear through not only investors blood, but nearly all American's.
Why? Because soon after hearing the word most people begin remembering 2007-08 financial crises which sent the US economy into a 19-month recession, which to make matters worse from a psychological standpoint has been coined 'The Great Recession'. Furthermore, since the 2007-09 recession is still fresh on everyone minds and was terrible in terms of job lose, declining economic activity, low 401-K balances and stock prices, when the 'R' word is used now, everyone immediately thinks of all those terrible things happening again. This causes fear and panic to quickly set in.
From a market standpoint, this can send equity and commodity prices lower, further increasing the likelihood of a recession. (Think self-fulfilling prophecy.)
The S&P rallied a jaw-dropping 60 points during Wednesday's session and left many traders wondering if the lows are in? Using eSignal software, I dive into the price action and outline the exact boundaries that should contain this "recovery."
The S&P 500 tracking stock SPY failed against Fibonacci resistance as expected and has bounced back into wave II resistance. We are net long in our portfolios, but seriously considering exiting and taking a low risk short against wave and Fib resistance. In the end, you can't know for sure what the future holds, only choose the most likely path with the lowest risk.