(Marco Bonelli) What's the definition of a "rebound"?
Is it a recovery back to flat (after a weak opening), is it an intraday rally (that fades in the last two hours of trading, though) or is it a powerful move from technical support levels helped by a decent amount of short-covering as traders were betting on the opposite direction?
Yesterday's move might have been a rebound (although it clearly can't be called a classic rebound) but given two weak days on Thursday and Friday last week, it was rather disappointing, which is also not surprising as the political and economic outlook didn't change despite all developments from the weekend.
Furthermore, as the discussion about the political landscape in Europe and the effects of last weekend's election on the economic picture becomes a bit murky and it's not clear if the rebound in the stock market yesterday and today is simply a reaction to the fact that the election results were already "baked in" and that the uncertainty is now gone (really?), if it's a move based on the belief that things will improve from hear or if it's even a celebration since a possible departure away from strict austerity measures might suggest an end to the recession sooner than later.
Back to the disappointing rebound in the US: The market might see a second attempt as market participants could take further falling commodity prices (in particular energy), the successful rebound in European markets (along with higher industrial production in Germany) and short-term technical support level into consideration!
In a week with little economic data and the Q1 reporting season winding down, maybe it's up to chart levels to define the direction: the Nasdaq (2946 and 2629 for the Composite and NDX, respectively), Russell 2000 (783.50) and Value Line Index (351.50) defended their April lows and the SPX just closed a fraction below the highs from a year ago (1370.50 and 1356.50), all levels that could provide short-term support - if any kind of buying activity remains muted as it did yesterday, investors might be a bit more worried about the deteriorating fundamental picture than thought.
Trade well.
(Marco Bonelli is the Managing Director of International for CL King & Associates in New York. The opinions expressed are his own.)
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