Stocks Bounce Back With A Vengeance

Last week I wrote, “The market looks like it just put in a near term low on Friday as the bulls showed up and defended the longer-term 200 DMA line.” That is exactly what happened as stocks soared last week and enjoyed their best week since 2013. I also said, “History shows us that 80% of corrections do not turn into bear markets and 20% do.” and the snap back action suggests this bull market has more room to run. Earnings are expected to grow massively and that is the big bullish catalyst that may keep this bull market alive longer-than-expected. For now, as long as February’s low holds, the bulls remain in control of this market. If support is broken, then this correction will likely get much worse. Conversely, the next level of resistance to watch are the recent highs from late January. If the market takes out those highs, that will be an incredible feat and suggest we are headed higher. Until then, I have to expect more sideways/sloppy action to continue. The market rallied hard last week and could easily pullback to digest that big run. 

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Thur & Fri Action:

The market rallied nicely on Thursday as investors continued buying stocks. Shares of Cisco ($CSCO) rallied nicely after the networking giant reported earnings. Separately, Amazon ($AMZN) said it will team up with Bank of America ($BAC) to offer loans to merchants. Stocks were relatively quiet on Friday as the market enjoyed its best weekly gain since 2013.

Market Outlook: Market Bouncing

The market is bouncing back after a steep 10% pullback. The big level of support to watch is February’s low and then the 200 DMA line for the major indices. For now, as long as that level holds, the longer-term uptrend remains intact. As always, keep your losses small and never argue with the tape. Want To Learn How To Invest? Sign Up For 1-on-1 Sessions With Adam Sarhan.