Earlier today it looked like the S&P 500 (SPX) was going to be up big on the back of higher oil prices, but then the Initial Unemployment Claims were released and significantly worse than consensus estimates.  This kind of pullback action over the past few days highlights what we were talking about relative to the “test of low” phase of the market where we begin getting the reality of what was feared in the “panic” phase of the decline.  Remember how we have been outlining the post-crash playbook:


Phase one – The panic phase where shock sets in and investors fear the worse – reflected in the 34% drop by 03/23 in the SPX that took place since late February.

Phase two – The Relief Rally phase where traders take advantage of the extreme oversold and hope the economic impact isn’t as bad as feared – reflected in the 17% ramp from 03/23 low into 03/30 peak.

Phase three – The frustration phase (I changed it from demoralizing simply because I dislike that word right now) where we test the low due to the reality of poor data – in process now


The bad news is the data is so much worse than anyone imagined even a week ago.  The good news is, we now know how bad it could get and we are closer to testing the low.


Past performance is not a guarantee of future results. Index returns are unmanaged and do not reflect the deduction of any fees or expenses.

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