I hope everyone had a great weekend.
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Here is this weeks episode of Momentum Monday:
This is an interesting moment in the markets. I figured I would share a couple extra posts that I thought did a good job of describing the current tape.
I really like this from ‘The Fat Pitch‘:
The S&P has now gained 13% since Christmas Eve, while the Nasdaq is up 16%. After the recent plunge, it would be normal for the indices to give up most of their gains and retest the lows again. That’s been a consistent pattern over the past 40 years. But when a plunge is followed by exceptional breadth like we have witnessed in the past month, a low retest has been unlikely.
Rapid plunges when the economy is still expanding – like now – are typically followed by strong forward returns. Moreover, it is encouraging that emerging markets, which have been the hardest hit by the threat of a trade war, reached a 4 month high this week. Those markets originally bottomed in October and retested those lows in December (a possible basing pattern).
It’s certainly possible that some of the rapid gains since Christmas will be given back before SPX moves materially higher. A period of consolidation and retrenchment in the weeks ahead would not be surprising. The trade war isn’t the only thing driving the market, but it has clearly been important and further deescalation will likely drive SPX to the top of its October-December range, just as reescalation could plunge it back towards its Christmas low.
The Northman Trader had an excellent market update titled ‘The Neutral Zone‘.
I hope you enjoy.
Have a great week.