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Tuesday, October 19, 2021

“My work shows that the ‘machine’ selling over the past 4 wks to Monday has peaked”


Stocks extended their rally after the Senate and Fed took unprecedented measures to protect the US economy from the coronavirus shock, with Black Rock (NYSE:BLK), Credit Swiss (NYSE:CS) and other big Wall Street banks said Thursday night that the major US stock market indexes marked at an inflection point aka Key reversal, Tuesday and it is time to buy stocks.

The $2-T US fiscal stimulus package proceeding through Congress has sparked big gains in global stocks, sending investors to reevalueate models from the Y 2008 financial crisis to determine the right time to buy back in, Monday there was about $15-T sidelined in cash and cash equivalents.

Thursday the DJIA finished up 21% from its Monday lows, establishing it in back in this Bull market. It was the index’s strongest 3-day percentage increase since Y 1931.

World stocks have risen nearly 8% this week and are on pace for their best weekly gainer since December 2011. They have recouped more than $5-T in the past 2 days.

Spotting an inflection point is not easy when the coronavirus is still spreading rapidly across Europe and the United States, but BlackRock and Credit Suisse said Thursday they had turned Bullish on risk assets.

Similarly, the inflection point for gold was seen Monday.

The unprecedented actions represent the type of decisive policy response we have been calling for – and set the scene for an eventual economic recovery,” said, th head of the BlackRock Investment Institute.

BlackRock, the world’s Top asset manager said the market sell-off had created significant value for long-term investors and told clients it now favored “rebalancing into risk assets.” Meaning Buy stocks.

BlackRock said it preferred US markets due to the strength of The Trump Administration’s policy response and the quality of the market.

Still, many investors are trying to work out the right time to re-enter markets, as 1 model from JPMorgan (NYSE:JPM) shows the correct time is Now, based on the view that a recession if there is 1 would be short lived.

Bearishness remains in many corners of the market, as uncertainty continues around the trajectory of the coronavirus pandemic and its potentially economic fallout.

Credit Suisse is positive on developed market equities, and it said: “There is merit in being an early mover rather than wait until a market bottom has become apparent for all.”

The bank said that over a 6-12-month frame, stocks offer “attractive value.”

US and European stock valuations based on a 12-month forward P/E ratio have dipped well below historical averages, according to Refinitiv data.

The positive momentum could continue in the days ahead if we see signs that government efforts to contain the virus are starting to pay off,” the firm said in a note to investors late Thursday.

To say that the stock market is now extremely oversold would be the understatement of the year.

We will likely see the S&P 500 test the resistance turned support in the coming weeks, but my work shows that the algorithm selling over the past 4 weeks to Monday has peaked, we are in The Trump Era.

Have a healthy day, stay home!

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