Bull Trap or restarting a Bull run?

[cyber888]

So what do you think. - 1) Bull Trap and we retest lows due to more unemployment, no economic growth, no end yet to covid-19 situation or 2) start of a Bull Run with a Fed tools (QE, buying equities) and Stimulus supported stock market ?

 

[Freedom56]

Massive short covering and rotation! Six stocks carry 22% of the market weight of the S&P 500. So a rotation into the top 30 stocks can move the market. Yes the market is looking beyond the virus but, the damage has been done. No market drops in a straight line down without a counter-trend rally. Just like back in 2000, the market started to collapse followed by a rally then a major plunge later in the year. Bubbles eventually pop. The overall market dropped over 30%, but that drop was limited by the strongest stocks in the market. In reality some energy stocks are down over 98%, some banks dropped as much as 60% from their 52 week high and some retail stocks are down 90%. Many of those energy stocks and retail stocks are going to zero. Mall REITS like the so called blue chip Simon Property Group dropped from a high of $186 to a low of $43 and rebounded to $61. This is no doubt to the fact that they won't collect any rent for the next few months, but how many retailers will survive this. Macy's use to be a $80 dollar stock and now trades at $6 even after this bear market rally. Macy's bonds are still rated investment grade but trade like they are about to default. This is why you can't trust the rating agencies.

 

[UnrealizedPotential]

Too many unknowns to make a guess. This market is unpredictable. I have never seen a bear market like this one. So I continue on with the investments that are comfortable for me going forward .

 

[jim584672]

I don't see any of this clearing up anytime soon. What that means for the market is anyone's guess. Remember it was rallying right into the pandemic, so that tells you something about how rational the market is.

 

[Kwirk]

Bear trap, I think. People are impressed with the size of the bailout/stimulus but I think damage is wider and deeper than any rescue can be. I hope I'm wrong.

 

[Montecfo]

Both!

It is both a new bull and we will retest.

Which is good, I need to keep nibbling on the lower prices.

 

[ckelly78z]

I vote for bear trap as well. I can't see this being a sustainable bull market with so many unknowns ahead of us...how long will the self quarantine actually last, what permanent damage to small businesses has occurred, when will production resume, and with which suppliers (Chinese ?), will consumer confidence return ?

 

[audreyh1]

Bear trap, I think. People are impressed with the size of the bailout/stimulus but I think damage is wider and deeper than any rescue can be. I hope I'm wrong.

I generally agree.

The market is finally taking a breather, which is a good thing, because ultimately people have to get past sheer panic, and just get bummed out instead.

However, we're going to be getting a lot of bad news in the next few months, and when bear markets get this bad and there truly is economic damage, there is usually at least a retest.

 

[pb4uski]

+ whatever on bear trap. I think it is way too early to assess the damage to the economy caused by this virus and how deep and long the recession will be and how consumer confidence will be shaken. My gut tells me this will get worse before it gets better and the rationale for the recent increase in stock prices is a mystery to me.

 

[daylatedollarshort]

Bear trap. My prediction: We aren't doing enough to stop the spread of the virus. It is going to be very, very, bad in some states. Florida is the next hot spot per the smart thermometer data and is home to many seniors, the most vulnerable group.

 

[audreyh1]

My gut tells me this will get worse before it gets better and the rationale for the recent increase in stock prices is a mystery to me.

Some feelings of relief?

But I agree those are temporary. A recession and high unemployment is inevitable.

Because we couldn't track and those infected and trace their contacts early and quarantine them plus monitor via testing, everyone has to stay at home to avoid hospitals being overwhelmed.

 

[mrfeh]

While I think the initial panic selling over the last month was overdone, I also think there is lots of pain to come. Global recession is coming, or more likely, already begun.

I'm sitting tight, not yet rebalancing into equities.

 

[Fermion]

I do not think this word means what you guys think it means (said in my best Spanish accent)

"A bear trap is a false technical indication of a reversal from a down- to an up-market that can lure unsuspecting investors."

https://www.investopedia.com/terms/b/beartrap.asp

 

[USGrant1962]

This article suggests that the run up may be driven by rebalancing in pension funds and balanced mutual funds. Also mentions short covering. It suggests this driver will continue over the next weeks and months. Hater warning - it is MarketWatch.

https://www.marketwatch.com/story/t...jp-morgan-strategist-2020-03-26?mod=home-page

I guess they got ahead of me, I'm still dithering on a big rebalance back to my target AA, but I think it will be bumpy for a couple of months - at least through earnings report season which starts soon.

 

[harley]

Bear trap. I hope for another day or so of bouncing up, so I can sell some of my recent buys for a profit. But I expect to buy them back on the way back down. It's not fantasy football season, so I have to have some game to play.

 

[audreyh1]

Short squeezes can lead to very strong up days.

 

[Dtail]

I also think it is a bear trap.
However there is an all out effort to try and restart parts of the economy for various reasons which include limiting any stock market losses.
If there isn't enough testing to show the true effects of the virus, perhaps certain states will restart their economies and thus perhaps spread out the downside effect.

 

[Closet_Gamer]

If you're trying to time it +/- 10% or so, its probably a bear trap. We're all suffering a lot bias emotions right now. Recency bias. Loss aversion. FOMO. All of this is in play in each of us at different times during something like this.

But who really knows.

I do think that in December I will be happy I bought at nearly any of the current up/down levels.

I'm 95% certain that in 2025 I will be very happy I did.

 

[jim584672]

As others have noted, a bull trap is when a market is going down, blips up, brings bulls in, then traps them and heads lower.

 

[DrRoy]

There is know way to know except in the rear view mirror. It will depend on whether the news from here is better or worse than what is expected and priced in at this point.

 

[tdv2]

Sure would be nice to know where things are headed.....but I know it's not knowable. Some of the bounce is surely due to longer term money rotating back in to equities....pension fund re-balancing and the like. From what I am reading it seems that many are reducing equity allocation, or have a plan to. I believe that's a normal path to be on, like a life cycle fund....preserve capital as we get older. Especially since many of us are FIRE'd already and should have a plan that keeps us from having to go live under a bridge if equities fall some stupid amount and stay there for a long time.

Having a plan and working it got me to where I am now (30+ years of accumulating). It's not easy, but I'm doing my best to stick to my plan. I just can't see how changing it drastically is the right move based on this crisis. I know...this time is different.

 

[foxfirev5]

I fail to see how printing more money with a greatly diminished GDP can result in a real bull run. Meanwhile I'll revisit the issue if/when VTI is below $100.

 

[Badger]

It ain't over and the fat lady hasn't sung yet. She is self quarantined and waiting for WHO to call "all clear". That will take a while. The effect on world economy will bounce around as knee jerk responses will keep things unbalanced. Time to hunker down.


Cheers!

 

[pb4uski]

I fail to see how printing more money with a greatly diminished GDP can result in a real bull run. ...

That was one of my concerns even before COVID-19 crisis. Over the last 40 years it seems that the stock market in increasingly disconnected from the economy with program trading, artifically low interest rates by the Fed propping up the markets, etc.

 

[dixonge]

The market is fluctuating during a period of great volatility.

That's all that can be said or inferred, really.