Equity markets are rallying around the Globe as Oil is trading above $30 for the first time this week and there is talk from Japan to Europe of enhanced QE from their respective Central Bankers.
S&P 500 Map 11-22-16 11:47 am
The Nikkei rallied 6% overnight and markets in the Eurozone have gains of 2½% or better halfway through their trading day. Keep in mind that The FOMC has its first meeting of 2016 next week. While there is absolute certainty that they will take no action on rates, their policy statement will get even more scrutiny than usual given the volatility in financial markets the last 3 weeks.
Market Alert » Japan's Nikkei index soars more than 4.2%; Hang Seng up more than 1.4%, but Shanghai slightly lower. https://t.co/rA2wgcyI6s
— CNBC Now (@CNBCnow) January 22, 2016
Japan’s Nikkei 225 market index may have just set a record for the shortest bear market in the history of financial market cycles. Earlier in the week The Nikkei fell 3%+ in one day to 16,416, a 21% decline for its August 15 peak. Dozens of financial reporter rushed to their keyboards, tablets and smart phones to scoop the story that the Nikkei was now in an Official Bear Market.
Business Insider Australia-Jan 19, 2016
The Nikkei 225 in Tokyo fell by 3.71%. It is now in an official bear market.
Japan's #Nikkei225 just had the shortest Bear Market in financial history. 3 Days. According to fin'l reporters who know zero about markets.
— Timothy Anderson (@TJAnderson1) January 22, 2016
The problem is that the textbook clearly says “A decline of 20% defines an Official Bear Market”. Professionals in the business know that a true Bear Market will last longer than 3 months, forget about 3 days. There needs to be a time component here, but I realize that’s very inconvenient in a world of “Breaking News”.
Oil traded below $26 earlier in the week and has rallied to $32 this morning, amidst some short covering following a not so bearish inventory report yesterday from the EIA. Does that mean that Oil is now in a New Bull Market?
Of course not. but why not? it’s just had a 20% move higher off the lows following a 15 month decline?
Japan Bear Market Lasted 3 Days | 1-22-16
There’s no doubt we’re going to end the week on a positive note after being very short term oversold a few days ago. The great thing about Wild Price Swings at major inflection points is that it really helps identify levels of institutional supply and demand for stock and sectors within the broader market.
Sure there has been lots of short covering in the energy space, so it might take a few days for the Fog to Lift, but by the end of next week take a close look at relative performance for a glimpse of what Big Dough Investors are buying or avoiding.