The bears had the upper hand this week and not only pulled the market from its recent high but also low enough so that the widely watched 200-day moving averages of the major indexes were pierced to the downside. The S&P 500 fell below its psychologically important 1,100 level and ended the week with a loss of -3.7%.
The market as a whole is now oversold on a short-term basis, so a rally is likely to develop within a day or two. The nature of that rally will provide us some hints about the future trend of both stocks and junk bonds.
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