There were a few news today that sparked moderate gains in all the main US indexes. Whether the catalyst was the Atlanta Fed President saying he is comfortable with the current rate hikes or the JP Morgan Chase CEO saying that the "storm clouds" over the US economy may dissipate, the main indexes ended with gains over 1%.
Below is the updated table with the indexes in a confirmed Bear Market territory highlighted in yellow. Is this the end of the Correction/Bear Market?
My point of view is that the Correction/Bear Market isn't over yet. We might see a rally that takes the index somewhere between 4,100 and 4,200 but that doesn't necessarily mean the Market direction will change. Reviewing the daily chart of the S&P 500 below, since Oct/2021 we have had only two rallies that have lasted more than four bars (pink dotted arrows).
That's how fast the selling pressure is crushing every rally attempt. Today is day one for the rally, it needs to rally the entire week to show some real force. That means rallying all week despite negative news about inflation, Covid, Ukraine war, China tensions, etc. It's not impossible, but it's unlikely. If it does happen, then the Market is giving us a great clue about how the balance of power could be changing between Bulls and Bears.
The selling pressure has been decreasing, that's for sure, the New Highs and New Lows indicator (NH-NL) is reflecting the reduced supply in all its timeframes. The Monthly columns, which are the fastest timeframe from all the ones displayed, displays a significant decrease in the New Monthly Lows, however for the past 22 trading days the New Monthly Highs haven't been able to reach a level of 500+. If at some point a significant rally is going to start, some stocks need to start making New Monthly Highs.
Bottom pickers, short covering and the Market reaching oversold levels naturally trigger reaction rallies. Those oscillations are part of the process, however there isn't a clear signal that the Bears already lost control of the situation. A one-day rally, no matter how powerful it was, it's still no evidence that the Correction/Bear Market is over. We have four more trading days this week, can the Bulls keep fueling this upward movement? Let's wait and see.
