The two main drivers of the correction that began September 21 in an environment ripe for volatility were 1) the September 19 threat by President Trump to increase tariffs on $200B of Chinese goods from 10% to 25%; and 2) Fed Chair Powell’s “far from neutral” comment on October 3 that suggested the Fed was going to be more aggressive in rate hikes despite slowing economic data. As the markets were in their October swoon and November retest, investors worried a lack of resolution from either would cause an even sharper slowing of growth as we exit 2018. When the markets reached an extreme oversold condition on October 26, in our intermediate-term bottoming process playbook we identified three negative catalysts that needed resolution for the market to begin the next leg higher. All three have seen at least partial resolution, and a key rally requirement indicator we highlighted last week suggests the S&P 500 (SPX) has further upside.

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