Stock Bounce May Not Have Staying Power

 | Feb 14, 2018 | 4:36 PM EST
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Our old buddy the V-shaped bounce seems to be alive and well, but does he still have the same staying power. Is it possible for him to carry this market back up to where it was in late January with nary a downtick?

I have some grave doubts, especially since the magnitude of the bounce would have to be so great. The S&P 500 is back into positive ground for the year but it is still below the 50-day moving average and would have to rally another 6.3% in addition to the 6.7% bounce it has already has off Friday's intraday low. While the buying was powerful today, this is not the same market we had in January.

The biggest change is that interest rates are rising. You wouldn't know it from the reaction to CPI, bonds, or gold today but the bears have some pretty potent ammunition. The action today can be explained by poorly positioned market players and some of those big volatility trades that are working in the opposite direction they did last week.

I was a buyer today and am sticking with the bounce, but I'll be a flipper into strength and will watch very closely for a rollover. I do not believe that the action of the past two weeks is an irrelevance that can be ignored. We will have to monitor the price action carefully to see if the shift in character is going to regain its momentum.

If it is true that volatility is back then we better be ready to do some selling into strength, but this sure has been a fun bounce and they do tend to last longer than seems reasonable.

Have a good evening. I'll see you tomorrow.

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