Equilibrium or End of Rally?
Almost on cue, stocks began to either stall out or moderate as they entered the lower end of the zone I first offered on December 21. That is a logical place for some to takes chips off the table if a revisiting of the Christmas lows is going to happen sooner than later. So far, stocks have done nothing wrong, especially with high yield bonds and bank loans snapping back so strongly in 2019, but I am not going to be complacent so easily. If bears continue to open stocks lower only to entice the bulls to step up in the afternoon and into the close, I will roll with it. However, if and when that tenor changes, I will likely become a bit more concerned.
As I keep mentioning, “V” bottoms are very rare and more characteristic of a long-term bear market. So not only am I not counting on one right now, I also do not believe it will happen because I don’t see this as a 2000-2002 or 2007-2009 affair.
Finally, our bear trend indicator for the NASDAQ 100 stopped flashing as of last week’s close. It’s not that big of deal because it moves from week to week. The Dow, S&P 500, Russell, Europe and emerging markets remain in place.