Let’s define a bounce as a thrust higher that rolls over to new lows. And a rally as a move that holds above previous lows and goes on to make higher highs. Obviously, one’s opinion on this question is important when it comes to strategy especially following the strong bounce in the S&P 500 (SPY) from last Friday’s lows. A bounce would mean it would be prudent to reduce exposure on strength, while the latter would mean it’s prudent to remain fully invested and invest our energy into making sure we are exposed to the best sectors and setups. In today’s commentary, I will make the case that this is a rally and not a bounce. Then identify the best stocks, sectors, and setups. Read on below to find out more….(Please enjoy this updated version of my weekly commentary published December 09, 2021 from the POWR Stocks Under $10 newsletter).
The stock market has put together an impressive rally off last Friday’s lows. From there, the S&P is up 3.8% even after today’s nearly 1% pullback. The Russell 2000 is up 3.6% although it’s off 3% from yesterday’s highs.
So, it’s certainly clear that the market has had a nice bounce and is now giving back some of these gains. Like what we experienced for most of November, most weakness is concentrated in small-caps and growth stocks.