After two clearly defined moves, the strong correction in February and March followed by the almost as impressive April recovery, the sentiment on Wall Street is now much more divided, with a Titans fight between the Bears looking for a test of the recent lows and the Bulls who do not want to lose sight of the historic highs achieved this year, which are even close to being tested.
Both sides have foundations for their intentions, the Bears are based on the economic reality of the moment, from the collateral damage that is already known due to quarantine, as well as from the high market valuations, with the forward PER to 12 months in the 20, 4, well above the averages of 5, 10, 15 or even 20 years, the latter standing at 15. On the other hand the Bulls have a strong ally, the endless flood of money that the FED and the US Government have already announced they are going to inject into the system, which adds to the already huge liquidity bubble that was created in the 2008 financial crisis and that has not been emptied.
Photo by Hans Eiskonen.
The fields are now without much conviction to push the market to their side, but they also do not let the opponent escape, we will see even when the impasse will last, and the variables indicate that the volatility may soon rise again.
