2016 has started on a terrible note. There has been indiscriminate selling across assets with investors pulling out $24 bn from equity funds in 3 weeks. Having said that - there seems to be no nervousness on US economy. Some people are saying that gloom has gone just too far. Finally - US market managed a smart bounce last week and now provides a source of comfort to Global equity markets.
Here's the fundamental reason why HOPE has made a huge comeback
As you can see in the chart above - S&P500 has bounced from 1820: the level which it protected last time and has been holding since April 2014. When markets hold important level even during times of panic - then it does send a message that BUY THE DIP crowd is still active and all is not lost. Thereafter - it all depends on how follow through buying takes place. It can create nervousness among bears and so the fight has potential to become interesting and not one-sided as it has been so far in 2016
The big question: Can S&P500 support offer hope to other equity markets around the world?
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication, you agree to make no trade relying in whole or in part on the comments of the writers