The Bulls Had No Fear
Today may be Halloween, but the Bulls had no fear. The U.S. stock markets closed higher today for the second consecutive day – the first time for the month of October. A lot of traders are probably happy that the month of October is over. Despite the back to back rally, this is still the biggest decline in a month for NASDAQ since 2008.
The Market Gave Back Gains Before Close
In fact, the rally off of yesterday’s lows, I think was better than 1100 points. We had this huge gain, and even though today, the Dow was up better than 200 points (241 points), it was up about 450 points going into the last hours. So we did give back a couple of hundred points of that gain, which, to me, looked pretty weak. The NASDAQ had a 2% higher close; it was up 144 points. But you look at the Russell 2000 – much smaller gain there. That index up just a third of 1%. The Dow transports, they were barely positive. Not even 2 tenths of 1 percent – a 15 point rise in the Dow Transports.
Bear Market Correction
Nonetheless, all the Bulls were out in force on the financial networks claiming that the correction is over. Everybody was confident that the lows are in; that this big back to back rally is proof that you’d better buy now, otherwise you’re going to miss the rally, and this is a typical correction, and now it has run its course. You know what? If this really was the “end of the correction”, most likely, there wouldn’t be so many people so confident that it was over. You’d have a lot more fear, especially on a Halloween. The fact that there is no fear, to me, shows that it is more likely that this is not the end of the correction but the beginning of the bear market. And that this rally is the correction. In bull markets, the market going down is a correction, because the trend is still positive. In a bear market, it’s the opposite: the rallies are the correction.