Stock Market Today: Rebound Traps

May 23, 2022, 3:36 pm EDT

Rebound Traps

Rebounds during the bear markets are traps for market participants. It is important to keep your powder try and valuable cash in a safe place rather than going back into the markets when rebounds occurred. 

Today Dow Jones jumped more than 600 points after the opening bell which seems to be very strong and bullish. The leading sectors are financial, energy, consumer staples, technology, and materials. However, there is no leadership in terms of making a recent new high or breakout. Thus, it is simply another oversold rebound. 

May is getting closer to finishing soon. The real balance reduction will start in June with ramping up rate hikes. In our view, home builders, retailers, and many technology companies are going to feel the pain. Distressed consumers also will show their fear of coming inflation by tightening up their spending to go through this difficult period. 

Investment strategy should be geared to a conservative style and avoid these traps of short-term rebounds. Let’s markets tell us if emerging leadership appears. 

As of now, watch out and stay away from these traps.

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