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Day Two Of Gains After Successfully Testing Support Last Week

The markets continued their rebound with all of the indices, once again, posting impressive gains. The S&P, from its high on 1/26/18 to its low on 2/9/18, was down as much as -11.84%. Now that pullback has been trimmed to only -7.55%. And I think that will be cut down to size even more.

After successfully testing trendline support last Friday and then bouncing off of there in earnest, it looks like the correction lows could very well be in.

The interest rate narrative, as I've mentioned before, continues to persist, even though I give no credence to it whatsoever. The narrative is that with the potential for the economy to overheat, that could cause inflation, and a larger rise in interest rates. But, as I've said before, that's wildly premature. And a convenient talking point for those trying to come up with a reason for the correction. (Hint: simple profit taking and a long overdue pullback was the culprit.)

We also had the potential for more DC risk with the incessant spending bill deadlines. Gladly a two year deal was reached so that drama is done and over with. We'll still have the DACA deadline coming up on March 5th, and the border security debate. We can also add in the infrastructure wrangling as well. But none of those outcomes will result in a government shutdown, so that's good news.

Make no mistake, whether the lows of this correction are in or not, there's still going to be volatility. But the pullback we've already seen has afforded many investors to pick up great stocks at fantastic prices.

And when the market ultimately makes new highs again, it will be coming off of a new sound base. And the fear of a correction will be a thing of the past.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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