Stocks may have found a short-term bottom, but out there on the horizon the next crisis is lurking.
Despite the short-term positive indicators surrounding stocks, it is important to keep an eye on the big picture.The U.S.'s enormous spending addiction has created a massive debt bubble that is going to lead the economy to its next financial crisis.
Consumer, government, credit card, auto loan, mortgage, student loan and just about any other debt you can think of is at a new record - and it won't end well. America's impending debt crisis is likely to materialize within the next few years, and when it does, its destabilizing effects will be felt deep throughout the financial system.
Stocks rebounded nicely over the past week. The S&P 500/SPDR S&P 500 Trust ETF has surged by roughly 5% since hitting what appears to be a short-term bottom at the height of the recent correction. The fundamental landscape surrounding stocks seems to be stabilizing and appears constructive in the short-to-intermediate term. I'll even go out on a limb and say that the stock market bottom is probably in for now.
The oversold indications projected by the RSI and CCI, the dip below 20 in the full stochastic, the textbook bounce off the 200-day moving average, massive sell volume, as well as other factors suggest that the badly needed correction may have come and gone. Moreover, S&P 500 futures had a successful retest of the lows, which happened in after-hours trading, thus it doesn't show up in the SPY chart. Nevertheless, most indicators point to a return to higher prices for stocks in the short-to-intermediate term.
Source: Bloomberg Pro Terminal
Trader Bozhidar Arabadzhiev
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