This Market Is Going To Bounce

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In his Daily Market Notes report to investors, whille commenting on the bouncing markets, Louis Navellier wrote:

The big news today was the Consumer Price Index which decelerated slightly to an 8.3% annual pace in April. It did suggest that inflation has peaked. Although consumer inflation decelerated a bit, Treasury yields rose in the wake of the CPI report, so some market observers were expecting a bigger deceleration in consumer inflation. 

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Commodity Bet

The other big news is that energy is doing phenomenal. Crude oil cracked a hundred dollars a barrel yesterday and it is back up sharply today. I feel very good about this big commodity bet we have in energy, fertilizer, food, shipping, and semiconductors. I'm very impressed with the rebound that I'm seeing. 

Bespoke Investment Group noted that the NASDAQ composite has had eight previous 25% drawdowns. And technically, between November 19th and May 9th, the NASDAQ composite did fall 27.6%. And that was over a 171-day period. The average 25% correction is only 161 days, so we have corrected longer than normal. In the eight previous times this has happened, the NASDAQ composite has risen 1.9% in the next month, 11% next three months, 20.4% next six months, and 33.5% in the next year.

Bouncing Markets

The market remains grossly oversold. We're having a good bounce here. We're still getting good earnings and I'm very impressed by what I see. So are we gonna go straight up? Absolutely not. 

This market is going to bounce. It's probably going to stall a bit and digest the bounce back. But it's very clear that good stocks do bounce right back while bad stocks fall like rocks. 

I think a lot of the risk has been run out of the market. We still have interest rate uncertainty and crosscurrents going on but the consumer remains incredibly healthy.

Responsible Consumers

According to the New York Fed, credit card balances rose to $841 billion in the first quarter and 229 million new credit card applications were opened.  Mortgages, auto loans, and student debt hit a record of $15.84 trillion in the first quarter.  So the bottom line is credit is still readily available for consumers, which bodes well for consumer spending, and the U.S. economy is driven by consumer spending.

Consumer balance sheets are in pretty good shape. Default rates are low. A lot of consumers have real estate wealth and money in the markets as well. Many consumers are very responsible with their debt.

Coffee Beans

A North Carolina math fan won $192,941 lottery prize using the number pi. Ruby, a 64-year-old bartender, bought a $1 Cash 5 lottery ticket that had the winning numbers of 3, 14, 15, 31 and 41. The bartender said he will pay off bills and put the rest into saving for retirement. Source: UPI.