October 3, 2022, 7:17 pm EDT
It Was a Rebound, But…
It was a rebound across the board, but there were several issues:
- Lack of Volume
- Lack of Leadership
- Tesla Breakdown
Lack of Volume
Major indexes rebound more than +2% (DJIA, S&P 500 +2.6%, Nasdaq +2.3%). But the volume was at a very low level as shown (SPY). It is an indication that the institutional investors were absent from today’s actions. Conventional wisdom points out that the volume proceeds price. Thus, we do not consider this rebound can go very far or change the fate of coming bears.
Lack of Leadership
The energy sector is the leading sector with XOM and CVX up more than 5%. However, by checking out these two stocks or the energy sector chart (XLE) we can find out that those stocks simply rebound from their previous gap-down. They are still far from making a new high or 52-week high.
Lastly, Tesla (TSLA) gapped down today with -8.6% loss is not a good sign for the stock markets. TSLA was a strong leader in the past two years among many mega caps (AMZN, AAPL, GOOGL, META, MSFT, NVDA). If TSLA cannot recover or lead again, then the stock markets spell out a weakness on the leading front.
Therefore, even if the rebound may continue another few days or even 1-2 weeks the outcome should be obvious. Bears will come back to drag the stock markets to a new low. Trying to catch the rebound for a short-term profit engages very high risks. Because bears will be back at the surprising moment.