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Stocks Attempt Another Comeback: Market Commentary from Cabana’s CEO – October 27, 2022

2 years ago

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Stocks are attempting another comeback after bouncing off support at the 3600 level (S&P 500) about 10 days ago. That level has now been held on four different occasions since June. As of this writing, the Dow Jones has cleared its 50-day moving average and the S&P 500 is fighting to do the same. The Nasdaq continues to underperform and still has a way to go.  

We will get the PCE (personal consumption expenditure) numbers for September tomorrow, just as stocks are meeting overhead resistance. For the current rally to become more than another brief bear market bounce, I believe we are going to need some good news out of the PCE report. The Federal Reserve will be looking to see whether there is any evidence that rising interest rates have impacted inflation. They will be meeting next week and while a 75 basis point hike appears to be baked in, a pullback in inflation could provide support for smaller hikes in December and the beginning of 2023. I think it is this glimmer of hope that is the impetus for the current rally in stocks. 

There is an abundance of market-moving events over the next few weeks, including midterm elections. We are 10 months into this bear market, making it of average historic length. It seems to me that we are coming to a critical juncture, whereby we begin to see daylight and a “soft landing,” and a mild recession becomes evident, or it becomes obvious that rates will have to move much higher, and a severe recession is in the wings. I think a mild recession has been priced in and the 3600 level for the S&P 500 reflects that. I do not think a severe recession has been accounted for and another leg down in stock prices is likely in such a case. One way or the other we will know a lot more in a few days, so buckle up. 

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January 17, 2024

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The Nasdaq Composite Index is a market-weight capitalization index that covers more than 3,000 stocks listed on the Nasdaq Stock Market. What is the Nasdaq Composite, and What Companies are in It? | Nasdaq