To V or Not to V: We Got the Answer Last Week
After the stock market became unglued in February, we got the usual bounce. Smart folks we read called for a re-testing of the lows. That meant prices would rise, then fall toward the low. The same folks thought the result would be a simple confirmation that February's drop was a correction in an ongoing bull market. The not so smart folks picked up this theme and parroted it in the usual places, in the usual way.
As market's are wont to do, the price action did not follow the script. Instead of rising then turning down again, the rise was powerful. At which point those who are not so smart began calling for a "V" recovery: No testing of the lows, just a continued leap into the stratosphere of the ongoing bull market.
At which point, the smart folks doubled down on the retesting of the lows. Part of the thinking here was that when "everyone" starts talking "V," then the chances of that being the case reduce. It's a somewhat "contrarian" stance, but there are worse things than being a contrarian.
So when stocks surged a bit on Monday, we found the "V-gans" triumphant - not. After that initial surge, we got what we got: a further fall. It wasn't quite a re-testing of the lows, but it was enough to X the V's. At which point, the "re-testing of the lows" returned as the theme du jour of the not-so-smarts. At which point the smarts pulled back on "re-testing" - albeit only temporarily (their contrarian genes having kicked in).
So where do we stand now?
Well, it's safe to say we go an answer to the "V or not to V" question: "Not!" As for the re-testing of the lows, we'd need to see further price declines to get there. Will that happen this week? Possibly. But if it doesn't, that won't mean it won't happen in coming days or weeks. Our thoughts, for what they're worth, are that we see some further declines at some point in the coming weeks.
Whether that puts us into the smart of not-so-smart camp, we'll leave to you.
As market's are wont to do, the price action did not follow the script. Instead of rising then turning down again, the rise was powerful. At which point those who are not so smart began calling for a "V" recovery: No testing of the lows, just a continued leap into the stratosphere of the ongoing bull market.
At which point, the smart folks doubled down on the retesting of the lows. Part of the thinking here was that when "everyone" starts talking "V," then the chances of that being the case reduce. It's a somewhat "contrarian" stance, but there are worse things than being a contrarian.
So when stocks surged a bit on Monday, we found the "V-gans" triumphant - not. After that initial surge, we got what we got: a further fall. It wasn't quite a re-testing of the lows, but it was enough to X the V's. At which point, the "re-testing of the lows" returned as the theme du jour of the not-so-smarts. At which point the smarts pulled back on "re-testing" - albeit only temporarily (their contrarian genes having kicked in).
So where do we stand now?
Well, it's safe to say we go an answer to the "V or not to V" question: "Not!" As for the re-testing of the lows, we'd need to see further price declines to get there. Will that happen this week? Possibly. But if it doesn't, that won't mean it won't happen in coming days or weeks. Our thoughts, for what they're worth, are that we see some further declines at some point in the coming weeks.
Whether that puts us into the smart of not-so-smart camp, we'll leave to you.
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