“The Sun also Rises”

It is not always dark. Good things do happen. Recently, investors seemed to be in a very dark mood. A pall has settled on Wall Street with six straight weeks of decline. There has been precious little logic in all the concerns expressed. Many are illogical and contradict one another. It just comes down to fear. That may finally be changing.

A recent technical look at market action indicates there are positive signs that a near-term bottom may have been seen. Fewer stocks are making new lows, trading volume is drying up on the downside, and a series of other divergences have been observed. This market is set up to respond to good news.

It is easy to get caught up in negativity. There is a bright, positive side too. What if Russia loses the war in Ukraine? How about the notion that inflation has already peaked and is slowly receding? What about the possibility that supply in the economy for many goods and services catches up to demand and comes back into balance sooner rather than later? In fact, excess inventory and price declines may begin to appear. Any or all these are entirely possible and would be very positive for stocks. It is not a time to panic, but a time to stay steady my friends.

El Toro Solo