Calm has been restored. Following the sharp -20% break lower in stocks in December 2018, the rally that followed has recovered the majority of the decline. Volatility has abated and I get a sense that investor confidence has also returned. That is what happens during bear market rallies. At least, that is what I think is going on here. Check out the monthly chart below of the S&P 500. Relative strength as measured by the RSI indicator (top) is making a series of lower highs and lower lows, not confirming the recent rally. The S&P has also rallied back to test the underside of the multi-year support line that has been in place since the bear market lows of 2009, a decade ago. I expect the nest move in markets will be a resumption of the downtrend. If we break out to new all time highs, I will reassess but for now, patience.
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