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Short-term Pullbacks Possible but No Bear Mkt Rally Signal

May 15, 2020
Short-term Pullbacks Possible but No Bear Mkt Rally Signal

In last week’s note, I discussed the crossroads that the Standard & Poor’ 500 index (SPX) faced after rallying into a resistance band that coincided with prior week’s highs at 2954, the widely watched 62% retracement (2934) of the 1Q decline and the declining 200-dma at 3002. Early this week the S&P broke below a key short-term uptrend level defined by its 15-dma (2828) and has been below that level for a good part of the past three days.

This suggests that a short-term correction is underway, one that many bearish pundits conclude was the end of a bear market rally. While that bearish view is understandable and can’t be disregarded, I continue to urge investors to keep an open mind.

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