The hopes of getting the market back to V-shape has recently witnessed another drawback. As optimism drives counter-trend bounces and oversold, reality never ceased to cut them short.
According to 10CFDs, the big challenge now is if the indices will ever find support without a full retest of the lows earlier experienced. The indices managed to rally to the point that the DJIA hit the headlines about a new bull market, though pessimists immediately showed large counter-trends of significant bear markets.
10CFDs says, “At this point, the recent lows should be properly tested even if it’s not perfect so far many stocks and sectors are ready not to be correlated with the S&P 500. For instance, Russell 2000(IWM) small-cap stocks are much closer to a retest compared to other groups. More so, a hopeful situation is that the worst has been priced in the market; hence support can happen without the retest.”
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The market inclination will be determined by what happens in the testing of the lows, whether the market is for a full retest. Though there is an initial gain in strength due to oil, there is counter-trend with regards to the unemployment rate. With the current surge in the unemployment number with about 5 million and more jobless claims in the US, the economic damage by the coronavirus has rubbed on the market.
“The only hope we can nurture is that the pandemic ends sooner than imagined so that its negative economic impact can be lesser. As it stands, the stocks are expected to find a bottom soon coupled with other levels of uncertainties.” Concluded, 10CFDs.
The impact of social distancing and other relevant measures that have been put in place to flatten the curve of the coronavirus has been yielding excellent results. However, the level of uncertainty remains the most challenging negative impact of the outbreak on the market.