Is that really the bottom? This was all that anyone talked about this weekend. The rally of last week is impressive but most commentary seem to indicate that it is not likely that things will settle. We don’t yet have all the data necessary to decide. The three major issues driving the market are: 1. China: This is good news: Shanghai’s reopening continues and Beijing has not been locked down. China is taking measures to improve its economy. Russia/Ukraine – There are no solutions, and commodity prices have remained high. There are signs that inflation is peaking according to the core consumer consumption expenditures price index report and the consumer price index. However, we do not know how fast it might be. It is possible to sense that at the very least, the Federal Reserve has stopped moving toward the target line. However that could be changing if inflation does not continue to drop. On Wednesday’s ISM manufacturing index will be released, followed by the ISM service index and May jobs report on Friday. This is a difficult game. The data must show some slowing but not too much. Too much slowing can lead to panic and “stagflation”. Market volatility is a consequence. Lowry Research’s technical analysis team expressed much doubt about Friday’s sustainable bottom. In a note to clients, they said that the problem was “it is so sizzle but no steak.” Such rallies from short-term oversold levels appear solid on the surface but there is no true leadership observed only stronger rebounds in the hardest hit… Though improved, the weight of evidence does not yet support a firm, sustainable bottom at this time.” CFRA Research’s old friend Sam Stovall agrees. He noted that “we remain skeptical about the rally’s sustainability.” He also said that “June is not a month associated with market fireworks,” noting that since 1945, June returns on the S & P 500 have been in the bottom-third of monthly returns.
