Stocks rallied this week. In North American markets it was enough to erase what had been negative gains year to date as at the end of August. Now the S&P 500 is basically back at its longer-term resistance levels (again) around 1100. Coming into the fall, we had some significant bearish sentiment amass in August and negative returns for the first 8 months of the year. This could favour some better than expected price action in September.
That said the art here is to weigh the probable range of price action over the next couple of months. On the upside we have the possibility of a bear market rally retracing the S&P back to the 1150 area. On the downside we still have the possibility of a re-test of the 950 and then 800 level if (as) we get further disappointment on the economic front in the next few weeks. In other words, if we buy or hold here, we better have a clearly defined sell rule laid out in advance. At this point the risk/reward ratios still favour safety over risk. Anyone who is talking about holding stocks for the long-term is still a danger to financial health.
Barry Ritholtz reminds us of the forest over the trees in this Tech Ticker clip yesterday:
Cory’s Chart Corner
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