The stock market (SPY) flirted with bearish market territory last week before rebounding. However, this bounce looks different … as if it could really be the end of this negative scare. 40-year-old investment veteran Steve Reitmeister explains the 2 main reasons why the bulls could be in the lead again and why it would be wise to join them. Continue reading the full story below …
(Please enjoy this updated version of my weekly commentary on the Reitmeister Total Return newsletter).
Our portfolio rose 5% last week … a good level above the S&P 500 gain …and a good tonic for what hurts you!
In fact, most of it was in line with our plan, with stocks advancing toward bear market territory at 3,855 before support arrived and a strong rebound. Unfortunately, this year we have seen several three-day rebounds that did not stop the downward pressure. So it’s hard to feel sure this time is any different.
But it feels different. Because? This vital topic will be the focus of this week’s commentary.
Today we should talk about 2 very good reasons why we may just see the end of the bear market scare in 2022.
First, and most important is the fundamental perspective. The only logical way for stocks to move into bearish market territory (less than 3,855) is to clarify and present the danger of an impending recession.
And it is true that …
High inflation + Hawkish Fed = bad ground for stock market gains
But neither does it necessarily equate to a recession.
This means that there were many reasons for investors to pause in the bullish market to see what happens next with the economy. In the process, much of the speculative excess of the stock market and the stink market had to be erased.… Sorry, GameStop owners … game time is up 😉
This put investors waiting for signs of future economic health or decline. It did not help that the initial GDP reading for the first quarter was surprisingly lower than the -1.4% estimates. This led to the sale at high speed to the city border of the bear market at 3,855.
However, while investors were looking at the moment of truth, they saw that the economic data for the first quarter of the second quarter did not say a fall … or a recession. In fact, as of today, the Atlanta Fed’s GDP Now estimate for the second quarter has just risen to a + 2.5% growth rate after the welcome publication of stronger-than-expected retail sales and industrial production. Accompany it with another impressive earnings season and there’s little reason to fear an air recession … and therefore little reason to push the sales button.
That’s the heart of the fundamental story that says we might close the chapter on this nasty fix … and you don’t have to worry about it becoming even more of a bear market.
Now let’s move on to the realm of sentiment and the technical side of the stock market equation.
4,000 was a logical support for the stock, as it has been every century for the index. However, the stock is cut from below like a hot knife passing through butter.
From there, the fall accelerated to peak levels of fear at 3,855 (below that = bearish territory). Not surprisingly, the market found support at only 3 points above 3,858.
This is NOT a coincidence!
These are professional traders and computers who say that there is no LOGICAL reason to switch from bull to bear.
Of course, the market movement is not always logical. But that is the day to day. Over time, logic prevails as in this case.
We collided with the logical resistance that rushed into the territory of the bear market.
THAT WAS CAPITULATION … THAT’S WHERE THE SALE ENDS AND THE PURCHASE BEGINS.
Reity, are you saying it’s just a bullish market here?
We could very well be on the verge of a 2-3 week FOMO race where stocks go up almost every session. Then, all of a sudden, you’ve broken above all the key moving averages, and we’re looking forward to seeing new highs again. Naturally, the bear’s conversation fades into the distance.
I feel like this is the strongest possibility. On the other hand, I was also able to see ourselves entering a period of consolidation between 3,855 and 4,100. At this time, the bulls and bears are fighting for the result for a while longer. But if the fundamentals remain positive (also known as solid economic growth), even this period will end with a breakout.
It is for these reasons that yesterday I put 4 new trades in my portfolio to focus more on the possibility of stock market gains. So far, so good on this front.
Just to be 100% clear, I’m not saying the bear market threat is over. The keys to this result are in the economic data.
If it weakens and the odds of recession increase, we will quickly return to the 3,855 door step. However, the more time we spend without this result … the more the bull returns to the lead … and the more likely we are to return to the old highs and beyond.
At the moment the risk is rising. So if you’re sitting in a pile of cash or in a big short position, reconsider that decision right now, as most signals point higher from here.
What to do next?
Check out my current portfolio of 11 hand-selected stocks and 3 ETFs within Reitmeister’s total performance portfolio that are perfect for this hectic market environment. The same portfolio that firmly beat the market last year and will do so again in 2022.
This service was created to find positive returns in all market environments. Not just when the bull is running at full steam ahead. Heck, anyone can benefit from this environment.
However, when stocks have a downward trend, or worse, a downward trend … then a different set of strategies must be employed to succeed.
Come find out what my 40 years of investment experience can do for you.
Also, have instant access to my full portfolio of 11 stocks and 3 ETFs that are ready to excel in this unique market environment. (This includes 2 little known investments that really benefit from the rate hike, which right now is the best trade in town).
Click here for more information>
I wish you a world of investment success!
Steve Reitmeister… but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and editor, Reitmeister Total Return
SPY shares. For the year, SPY has fallen by -13.76%, compared to a% increase in the S&P 500 benchmark index over the same period.
About the Author: Steve Reitmeister
Steve is best known to the StockNews audience as “Reity.” Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the portfolio of Reitmeister Total Return. Learn more about Reity’s background, along with links to his latest articles and stock choices.
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