Is this market finally beginning to price in a “double dip” recession?
As we anticipated, the tide has appeared to have changed for the U.S. equity markets.
Our short-term Advance/Decline and Volume indicators and oscillators reversed direction today and are now moving downward (a bearish trend). Although these are initial reversals and these indicators can reverse course at any time (in this case, once again turn positive or bullish), generally a reversing trend remains in place for a matter of days to weeks. As such, we would anticipate the U.S. markets to trend lower (market pullback) or at least trade in a sideways consolidation period.
Is this market finally beginning to price in a “double dip” recession? Has the market advance too far and too fast, overshooting the most optimistic recovery expectations? Perhaps…however, it is simply too early to read too much into these early warning signs. For now, we are anticipating a “pause” and likely “pullback” from current levels. The strength, magnitude and duration of any pullback have yet to be determined.
