Market Enjoys a Healthy Bounce, but Is the Worst Over?
There is a sense of relief after the market enjoyed a strong day amid some turmoil but we'll see if the lows hold.
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The combination of an oversold market and no new tariff news helped to produce a very healthy bounce on Friday.
The S&P 500 gained more than 2%, and the Magnificent Seven recovered 3%. Breadth was excellent, with around 7,800 gainers to 1,900 decliners. The indices closed at the highs of the day, which is a positive sign.
The big question now is whether this is just a bounce that will fail or the start of a new uptrend. What the bulls need at this point is a follow-through day next week with a big gain on high volume. That would signal that the worst is over, at least temporarily.
Unfortunately, there is still a very high level of uncertainty out there, and there is a growing concern about the potential for a recession. The decline in consumer sentiment reported on Friday is notable and is a warning sign about the potential for economic slowing. Also, the onslaught of tariff news is far from over and could cause a disruption at any time, but there is positive progress on Ukraine and in congress on the budget. It looks likely that a government shutdown will be avoided.
Strong days like we had on Friday create a sense of relief, but it is premature to declare that the worst is over. Next week, we’ll see if the lows hit on Thursday hold and whether buyers have the confidence to buy more aggressively for the longer term.
Charts are developing some support, which is the first step, so make sure you have a shopping list ready to go.
Have a great weekend. I’ll see you on Monday.
At the time of publication, DePorre had no positions in any securities mentioned.
