The stock market’s bounce yesterday was certainly a good one...as the S&P 500 retraced 2/3 of its losses from Friday. The move came on very good breadth, but very low volume. The breadth was 8 to 1 positive on the S&P 500, so that was quite nice, but volume was the second lowest since February (if you throw out the day before Memorial Day...otherwise it was the third lowest). The MUCH better data on Pending Home Sales got much of the credit for the rally...as that number jumped a whopping 44%. However, it is not out of the realm of possibility that some month-end window dressing...and some make-up from Friday’s Russell Reconstitution...may have played a role in the bounce as well.
The advance took the S&P back above its 200 DMA, but it’s still quite close to its all-important 3,000 support level, so the stock market is far from being out of the woods. There are certainly some reasons to believe that this bounce can hold up for a few days more. Chairman Powell and Secretary Mnuchin speak in front of Congress today...and Mr. Mnuchin is sure to paint a positive picture about the economy. Also, today is the last day of the quarter, so we would see some quarter-end window dressing. Finally, we have a long weekend coming up...and the market tends to do well around long weekends.
Of course, there is no guarantee that yesterday’s bounce will last longer. Let’s face it, the last time Mr. Powell spoke publicly, it created a downdraft in the market place. In fact, they pre-released his opening comments...and he is going to warn the country that the re-opening of the economy could create as many problems as it solves (and might even ...
