Weekend Report - Will the Market Rally Gain Momentum?
May 15, 2022To say that we are in a bear market I think is an understatement... Stocks have gotten beaten down to a pulp lately which makes the probability of an over-sold market rally very high.
Monday and Wednesday the market got hammered down almost 6% on the Nasdaq from the intraday peak with many stock names down 2-3X the market averages. This happened after the general market was already down nearly 24% from its peak in January. With this much damage in the markets, it makes sense that we are overdue for a break which seemed to come on Thursday and Friday when the market began to rally. So will this market gain momentum?
How far this market rally goes nobody knows, but with stocks beaten down so badly sellers are bound to take some profits (covering shorts with buy orders) and buyers are looking for seemingly cheap stocks to buy (more buy orders). All of this buying is bound to make the net order flow of the market bullish (more buying than selling).
While it's always a good idea to be on the trending side of net order flow, jumping into the market thinking the bear is through might not be a such good idea long term. Currently, the trend is down and although it might be tempting to call a market bottom here, bear markets tend to rip higher for a short time followed by more downside like we saw in March and you don't want to get caught in the landslide. It's probably best to let the market just catch its breath and sit on the sidelines...
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