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Profit from the Pros By Kevin Matras Executive Vice President
Stocks Closed Lower Heading Into End Of The Week
Stocks erased Wednesday's sharp gains and are now lower heading into the end of the week.
Wednesday's snapback was exactly what the market was looking for.
The powerful rally had technician's on the lookout for a follow-through day. (Following a strong rally off the lows, a second strong up day should follow suit – that means another rally of 1% or more, with the strongest follow-through days coming between days 4 and 7. Stocks can go up or down in the meantime, but they should not take out the lows seen on day 1.)
Yesterday's pullback undercut Wednesday's lows, so the count starts anew once a sharp rally is posted.
That could be today, or next week, or whenever.
Once we get that rally and a follow-through day, that could signal that a new uptrend could be starting.
In other news, yesterday's final estimate for Q2 GDP came in at -0.6% as expected, confirming that we unofficially entered into a recession. (With Q1's -1.6%, that made it two quarters in a row of negative GDP, which is the technical definition of a recession.) Personal Consumption, BTW, was revised higher to 2.0% (annualized) from the previously reported 1.3%.
And Weekly Jobless Claims came in better than expected, falling by -16,000 to 193K vs. last week's downwardly revised 209K and views for 218K.
Today we'll get Personal Income and Outlays, the Chicago PMI, and Consumer Sentiment.
Today also marks the last trading day of the week, month, and the quarter.
Q4 typically marks the best quarter of the year for stocks.
After a such a challenging year, we could use it.
Couple that with S&P valuations at multiyear lows (and trading below their 5-year average), along with a strong labor market, strong earnings, strong consumer spending, and strong GDI growth, not to mention a very oversold market, and there's plenty of reason to believe that this Q4 could be getting ready for a big end of year rally.
Executive Vice President, Zacks Investment Research
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