November 9, 2023, 3:07 pm EST
Getting Back the Reality
Last 8 sessions the stock market rallied 5-7% for the major indexes which scored the best performance within two years. The reason behind the rally is based on speculation of the ending of the rate hike cycle and short-squeezed from the market participants.
First of all, although Jerome Powell did not mention the rate hike is over, some traders think the pause of the rate rike means the end of rising rate is about to finish. This view may be true. But, it does not mean that there will be a bullish view ahead of us. In fact, the reality is the other way around. The slowdown of the economy, shutdown of the business and higher unemployment rates are going to come first before we are sure the bottom is there.
Second, short-squeeze the traders and push the market into a positive-feedback process for the overly optimistic rally that is not sustainable for sure. We can easily see this pattern by the lower-than-average volume from all major indexes in the past 8 sessions. Of course, short-squeeze is a short-term trading market behavior that cannot represent the turn over or change of the direction.
The reality is that the inflation is still there, dual wars (Russia-Ukraine, Israel-Hamas) is far from over, and the slowdown of the economy is on the way. Therefore, we hold our view for the bearish outlook for the rest of 2023 and first half of 2024.