It was a calm trading day on Wall Street but it was just what the market needed after 7 days of the wild movement. Yesterday, we saw the narrowest trading range since February 1, but the question now is whether we’ve seen the last gale or rather, we’re headed now for the eye of the storm.
The bears will say that higher interest rates are just the beginning and that very shortly we’ll see the latest bottom tested. The bulls, on their part, will claim that the last price correction was necessary and even desirable and that the economy and fundamentals remained unchanged.
On a technical level, the indexes advanced rapidly over the last few days, and a retreat – to a certain extent – would make sense, but this is a market that has proved over the last few years that it tends more to experience a “V” shaped recovery rather than a more traditional retest, only to be followed up thereafter by upward momentum.
In our estimate, despite the calm movement yesterday, the volatility is here to stay for the near future. It won’t be wild to the extent that it was over the last 9 trading days, but relatively speaking, we’re going to be seeing larger trading ranges and the movement will be more random and less predictable.
The Consumer Price Index (CPI) figures will be released today before opening at 8:30 N.Y. time and will command a lot of attention. The market didn’t pay these figures much heed over the last few months seeing that inflation wasn’t weighing on players’ minds, but if we see robust inflation numbers today, we’re going to see significant movement.
Even in the event that most of the price correction is behind us, trading has indeed changed – which, to ensure success, mandates a different trading style than traders had acclimated to over the last few weeks. It’s hard to believe that we’ll return to the same movement pattern that we saw in January, when the market traded up on a beeline, uninterrupted.
Daily Summary: The Dow Jones rose 0.16%, the S&P 500 tacking on 0.26%. The NASDAQ tacked on 0.45%.
Hot Stocks: BIDU, FOSL, CMG, MET, OXY, BG, TAP, WYN
Have a great trading day!