Day 1 (11:30 AM Update). Day 1 of a potential new rally attempt is all that you can make of yesterdays massive move up. The trend of the market is still down. While yesterday was the first ever +1,000 point up move in the Dow Jones Industrial average, it was no where near the top percentage single days gains of the past 90 years. In fact, according to research from Investors Business Daily, the 9 biggest moves have all happened inside the context of a bear market (falling prices) and only one led to a meaningful rally and eventual bull market. (see article here: https://www.investors.com/how-to-invest/investors-corner/bear-market-stocks-big-one-day-gain/)
Our Current Market Outlook remains “Market in a Correction” and our light is still “red”. Having said that, it is worthy to note that a few extreme technical readings were registered on Friday and Monday, along with a rare TRIN signal yesterday, which have historically signaled that a short-term bottom may be in and that a meaningful bounce may be near. There are many cross-currents and seasonal trends impacting the stock market currently, and coupled with the political and economic matters of the day, this has led to increased and wild volatility. We have been stressing for some time the need for investors to raise cash levels and employ defensive tactics, and we are praising God for that discernment! The “math of the market” is objective and it demands investors respect.
Given the severely oversold condition of the stock market, and the historically high success rate of the aforementioned extreme internals at identifying a near term bottom, it is very likely that the market will rally meaningfully in January. Today will be a big test for the bears. If they drive stocks lower and undercut Mondays price lows, then the odds would favor immediate lower price levels and a failure of the signal from the internals. However, if the bears run out of selling ammunition today and tomorrow, the bulls may become emboldened and begin a campaign of buying again anticipating good news in 2019 from the Fed, or on the trade war, or from earnings releases which ramp up in the 2nd half of January. The bottom line is this: a market bottom is not a single day, but a discernible process of price and volume action over a minimum period of time that can generate a “green” light and create a lower risk entry point for investors. Until that happens, remain alert yet calm, and be hopeful, but realistic.
Have a Triumphant day! ® Ps. Happy birthday to my brother Michael!
The information in this article is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. Not to be used as legal or tax advice.
©2018 Triumphant Portfolio Management, LLC.