Date: January 11, 2019

Stocks into Zone Where Rally May Stall or End

It’s been one heckuva start to 2019. Just listen to the media and pundits tell you how stocks have rocketed  7, 10, even 12% since Christmas. While that is true, it’s a bit misleading as they forget the carnage from Q4. As I wrote about here and here late last year, there was certainly a preponderance of evidence to suggest a bottom and vicious bounce. That has come to fruition and I am glad the market is cooperating with the likely scenario.

Stocks now begin to face the zone I first offered on December 21 as a logical point where the rally may start to stall out or even end as you can see below. The market has done nothing wrong so far, but it has come very far, very fast.

In my 30 years, I have never  been a big believer in “V” type bottoms where stocks fall hard into a low and then rally straight back up, essentially unabated. They are rare and don’t have a super track record. The low after 9-11 was a classic “V” and that ended up failing after a very strong rally as you can see below.

Right now, I am keenly watching for signs that this very powerful rally off the bottom is stalling or ending. My concern remains that the stock market may want to head back down to the Christmas lows and say hello before a more meaningful and sustainable rally takes hold.


Paul Schatz, President, Heritage Capital