Why do stocks go down?  The fragile 'bear market' bounce confirms investors' fears

Why do stocks go down? The fragile ‘bear market’ bounce confirms investors’ fears

Is that all there is to it?

US stocks rebounded significantly lower on Wednesday, confirming warnings from some market veterans that sharp bounces in what has so far been a bearish year for stocks may be little more than the kind of choppy, short-lived bullish bounce that characterizes them. Bear markets.

“It is never wise to do too much of a bounce that hasn’t made significant technical progress, especially when no real capitulation occurs, despite the ongoing downtrend,” Mark Newton, head of technical strategy at Fundstrat, said in a note on Tuesday.

Dow Jones Industrial Average DJIA,
-2.97%
It fell more than 800 points, or 2.5%, at its lowest level in the session, while the S&P 500 SPX was down,
-3.43%
It fell 3% to trade near 3,966 and the Nasdaq Composite COMP,
-4.12%
It fell 3.6%. It comes after the Dow jumped more than 400 points on Tuesday, while the S&P 500 advanced 2% and the Nasdaq rose 2.8%.

Stocks last week fell sharply last week with the S&P 500 close to entering bear market territory — down 20% from its recent peak — before rebounding on Friday. Close below 3,837. 25 could represent a 20% decline from the record closing of the large stock index on Jan. 3.

be seen: Despite the rebound, the S&P 500 is hovering close to a bear market. This is the important number

While the S&P 500 has not yet technically entered bearish territory, analysts have noted that the sell-off has demonstrated the characteristics of a bear market. Some technical analysts have been wary of calling for a bottom in the near term as the sell-off in stocks, while aggressive, has remained largely orderly.

Cboe VIX volatility indicator fails,
+ 13.87%And
Sometimes referred to as Wall Street’s fear gauge, the push above the mid-30 range was seen as one sign that investors had not made the kind of “capitulation” that often paves the way for a sustainable recovery. On the upside during the Friday and Tuesday bounce, some analysts are looking for some near-term upside, which may continue to confuse market speculators.

boarding volume on Russell 3000 RUA,
-3.35%
Voters came in on Tuesday at 88% — just shy of the bullish 90% threshold, Jeff Degraaf, founder of Renaissance Macro Research, said in a note.

Meanwhile, the 10-day figure is in overbought territory, de Graaf said, but noted that it tends to be a “bullish push signal” three months ahead, and better than the three-week forward signal (see chart below).

Al-Nahda Macro Research

“There is some momentum developing from the case of deep insider oversold and extreme sentiment since last week,” said Degraaf. “This does not negate a bear market, but it should provide more upside and frustration for cash and selling.”

Wednesday’s weakness came as investors, who shrugged off deeply disappointing results from Walmart Inc. WMT,
-6.32%
The day before, I had a concern with Target Corp. TGT competition,
-26.45%
It also revealed that it has seen its margins affected by higher labor and fuel costs. Target stocks fell more than 25%, leading to losses in the retail sector.

Read: Target stocks decline with lower profits as a result of shifts in consumer spending and jump in shipping costs

What was particularly worrisome was that Target was supposed to be shielded from the sharp rise of the US dollar against major competitors because it is only a local retailer, Louis Navilier, founder of Navellier & Associates, noted in a note.

He noted that Jerome Powell’s comments on Tuesday, which are read as a hawkish affirmation of the central bank’s intention to tighten policy until inflation convincingly falls even if it causes economic pain, were cited as a factor.

“More than ever, evidence of peak inflation may be needed for a sustainable market recovery,” Navelier wrote.

See also: Equity investors are now beginning to feel the five stages of bear market grief

2022-05-18 16:31:00

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