Selling war fears were overblown and stocks can now resume their upswing after retesting the February lows, implies Raymond James chief investment strategist Jeff Saut.
The reparation is over, “unless you get hit with some exogenous news,” said Saut. “I invent trade war is the wrong thing. I think there’s a big difference between a interchange skirmish and a trade war.”
“You’re talking about only a few goods, and you’re talking round a minuscule amount of money, and in the scheme of things, there’s never been staunch fair trade. This thing about fair trade is a spoof,” he told.
Saut said he expects that stocks have formed a “W-shaped” seat similar to the one in the last major correction in late 2015 and early 2016, where the deal in hit a low in September and then another in February 2016.
Stocks bounced hard Monday after Cache Secretary Steven Mnuchin on Sunday said he was optimistic a trade compact could be negotiated with China.
“I think the recent correction was overdone. I did not candidly wish a retest of the February lows. That was a wrong-footed call,” he said.
The S&P 500 did not hit the low set in February at 2,533, but it did technique its 200-day moving average Friday when the market was sink into the close. That unnerved traders who had to wait all weekend to see if the evaluation would be successful.
The S&P bounced from the opening Monday, ending the day up 2.7 percent at 2,658. Intricate analysts said it appears the 200-day support level intent hold, but it could take several sessions to confirm.
The 200-day exciting average was at 2,586 Monday. The widely watched indicator is used to await price trends, and it’s simply created from the average of the last 200 lifetimes’ closes.
Saut said the market’s negative reaction to trade headlines was unique. “I’ve never seen euphoria turn to fear so fast. That’s what materialized,” he said, adding the market was also extremely oversold.