Opinion: That massive one-day stock market rebound was a sucker's rally

[nitpicker]

https://www.marketwatch.com/story/that-massive-one-day-stock-market-rebound-was-a-suckers-rally-2018-12-27

Opinion: That massive one-day stock market rebound was a sucker’s rally

Published: Dec 27, 2018 5:03 a.m. ET

Michael Sincere
Columnist

Many traders and investors were expecting (or hoping for) a huge rally in the stock market this week. And they got it — at least for one day.

The contrarian signs were there: bearish sentiment in the AAII survey rose to a five-and-a-half year high; at the close on December 24, the technical indicator, RSI (Relative Strength Indicator) plunged well-below 30 (oversold) to around 19 — a level not seen in a decade. Moreover, the financial media also turned negative, so it’s been hard to find many bullish articles. And then, like a dream come true, both the Dow Jones Industrial Average DJIA, +4.98% and the S&P 500 SPX, +4.96% rallied 5% on the day after Christmas, shattering records and surprising nearly everyone.

Except that “the most violent, fast, parabolic countertrend rallies mostly occur inside bear markets,” veteran market technician Jeff Bierman said in an interview. “This was a ‘dead-cat bounce’ short squeeze that was engineered by the high-velocity algorithms. The market went up too far, too fast to believe it is more than a one-day wonder.”

Bierman says look at the facts: 84% of the stocks in the S&P 500 are still trading below their 200-day moving average. And 95% of stocks in the S&P 500 are still trading below their 50-day moving average. Another breadth statistic from Bierman: On the 1,000 point Dow day, there were 114 new lows on the New York Stock Exchange, and only one new high. If this were truly the end of the bear market, you would not see such a disproportionate number of new 52-week lows versus highs on the NYSE on the biggest rally of the year.
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[rampartc]

1. +1

[Throck]

2. My 401K is up $3.75

But I made $9.45 in cans out walking. I am so retiring in 100 years.

[Shell_Seas]

5. Yay!

[Squinch]

3. Dead cat bounce. There's more downside to come.

[NRaleighLiberal]

4. Yup..dead cat bounce indeed.

[elleng]

6. Today/Now:

S&P 500
-1.93%
Dow
-2.05%
Nasdaq
-2.09%

[Sherman A1]

7. Yup

time for the

[OilemFirchen]

8. Volume was modest as well.

About half of the volume of 12/21 - the day that cemented the overall market into bear territory.

[kimbutgar]

9. It was probably a lot of program trading

Most of stock trading is done by computer algorithms and certain stocks probably went to levels indicating a buy based on earnings vs valuations. I thought about playing the market for the day flipping stocks for 2-3 point gains. But those computer buy programs get first priority on the major exchanges over regular people.

Before those programs came into play in the 90’s I made good money day trading. Paid for my kitchen remodel with cash from playing the market in 1995.

[OnlinePoker]

10. As of right now it's given back over 50% of yesterday's gains

Overall, the Dow is down 9.65% on the year and only 10 of the 30 stocks in the DJIA are positive for the year. It's also the last day for stock loss trading today.

[Farmer-Rick]

11. Yeah, there was a rally in Oct 1929 too. But it didn't help.......