Oct 04, 2022
VOT Research Desk
Analytical Viewpoint
The S&P 500, Nasdaq 100, and Dow Jones have all broken through their respective levels, and stocks are now rebounding sharply from the summer trough. A bear market is likely to have rallies of this nature, which have been intense in recent days for futures.
We haven’t seen what I would consider any surrender out of equities, despite considerable stress and frantic price movement in the FX and bond markets. There isn’t much panic even if bearishness is strong. The rather orderly collapse indicates that we have not yet entered a very difficult phase for stocks.
The surge may continue for a little while longer or it might cease right now. Strong “out of the blue” surges that attract new buyers and make shorts run for cover are frequently the highlight of bear market recoveries.
Initial resistance is located around 3640, but if it doesn’t hold, we may need to head up toward the trend-line descending from the summer highs and, maybe, as high as 3886 before the rebound loses speed. On the downside, a break below 3584 is required to restart a downward trend. Each rebound will be viewed with extreme suspicion if the drop continues to be orderly.
A bottom that will usher in a more enduring rebound, however, might occur shortly if we have a cascade in price action coupled with a significant increase in the VIX.
