Floor talk Thursday 14:35
Don’t look now, but the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 are all positive for the week. That’s not always such a laudable thing, but considering how they started on Monday, it’s downright astounding.
Briefly, at their Monday lows hit soon after the open, the Dow, Nasdaq, and S&P 500 were down 6.6%, 8.8%, and 5.3%, respectively. At their highs today, they were up 8.4%, 12.3%, and 6.6% from those lows, respectively.
Generally speaking then, the indices have pivoted from being oversold on a short-term basis to being overbought on a short-term basis. To that end, Apple (AAPL 111.57, +1.88) was in a bear market on Monday (i.e. down more than 20% from its high) and back in a bull market (i.e. up 20% from its low) shortly after today’s open.
The speed at which the sell-off and the rebound occurred has left everyone grappling to explain why it happened, what it means, and what comes next. No explanation is wholly sufficient and often matches the character of the market at the time it is provided.
While there might be reason to feel better about the market after the recent rebound, all this week’s action truly succeeded in doing was damage retail investor psychology further and increase the level of uncertainty that was already in the market and had kept the S&P 500 range-bound.
There is some new mistrust about the price behavior over the past week and the forces that have arguably been behind it. That mistrust isn’t going to fade away easily and it’s doubtful that the market will trade easily in the near term because of it.
What we’ve probably seen take place is a reset of the trading range to lower bounds (roughly 1870-2000) that will have the market chopping around like it did earlier in the year as it aims for fundamental insight that will help clear away the uncertainty for better or for worse. The direction of earnings, inflation, and interest rates will all be helpful in answering why things happen, what they mean, and what comes next.
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