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Rebound In Darkest Hour: Why Markets Always Surprise

By Investing.com (Francesco Casarella/Investing.com)Stock MarketsJun 27, 2022 01:16PM ET
www.investing.com/analysis/rebound-in-darkest-hour-why-markets-always-surprise-200626353
Rebound In Darkest Hour: Why Markets Always Surprise
By Investing.com (Francesco Casarella/Investing.com)   |  Jun 27, 2022 01:16PM ET
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For those who missed last week in the markets, these were the returns of the major stock indices (second column to the right):

Major Indices Returns
Major Indices Returns

Source: Investing.com

As we can see, U.S. indices returned between 5.41%—for the Dow Jones Industrial Average—and 7.5%—for the NASDAQ Composite—in just one week.

Now, it's hard to say whether this will be another dead cat bounce or whether we have reached the bottom and markets are about to reverse. What is certain, however, is that timing the market is a fool's game.

That is why 99% of traditional investors should always have a medium- to long-term strategy instead of following the market's ups and downs.

Nonetheless, it is still fair to say that last month's most significant rebounds came when pessimism was at its highest. 

US Stock Market Investor Sentiment
US Stock Market Investor Sentiment

Source: Callum Thomas

The chart above shows investor sentiment in July 2022 compared to the historical average (which, for reference, is 38% bullish, 30.5% bearish, and 31.5% neutral). When we look at the entire movement from June 1 to June 22, we notice how pessimism increased daily.

Weekly Retail Imbalances
Weekly Retail Imbalances

Source: JPMorgan

Moreover, (see chart above) the most significant weekly rebound in recent months was the one with and biggest-selling by the retail public. In short, most missed this recovery.

But if that wasn't enough (see chart below), professional investors and asset managers were at the minimum positioning on the equity component when the market bottomed.

Asset Management Positioning In US Markets
Asset Management Positioning In US Markets

Source: Macrocharts

This again highlights how being a short-term trader is a losing game for most investors—including those who do it for a living.

It is always better to leave it to the market and act on diversification and strategic and tactical asset allocation.

Rebound In Darkest Hour: Why Markets Always Surprise
 

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Rebound In Darkest Hour: Why Markets Always Surprise

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Comments (9)
dar dar
dar dar Jun 30, 2022 8:49AM ET
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absolute nonsense or going down another 25%. have a good day
Moussa Berthe Berthe Moussa
Moussa Berthe Berthe Moussa Jun 29, 2022 4:52PM ET
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Moussa Berthe
Casino Crypt
CasinoCrypt Jun 27, 2022 9:46PM ET
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The beauty of sharts doesnt show the net negative returns after hidden inflation ( property , gas , insurance , medical , internet and call prices ) are  factored in . so long term on a basket of stocks you may just break even or much less if real estate inflation runs at 30% .
Rich Ash
Rich Ash Jun 27, 2022 8:49PM ET
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Good article. Dont sell. Dollar cost average into the market. $1000/month for me will work out by retirement👍
Adi Avivi
Adi Avivi Jun 27, 2022 5:38PM ET
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I'd correct you as a single short term strategy always wins is to trade daily (or weekly) with the trend. If we see the trend down, play with shorts only. If the fed prints money, play with longs. Easy, no risk strategy.
George Pichurov
George Pichurov Jun 27, 2022 3:32PM ET
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Don't you see the rates, stuрid? Come tell me these prices are sustained at 3-4% rate.
Umar Khan
Umar Khan Jun 27, 2022 2:57PM ET
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3000
Jack Peterson
Jack Peterson Jun 27, 2022 2:11PM ET
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The excessive exuberance continues….. until it doesn’t…
Robert Cox
Robert Cox Jun 27, 2022 2:04PM ET
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Not too hard. It's another Dead Cat bouncing. There was very little significant economic data released last week.
Janne Nuopponen
Janne Nuopponen Jun 27, 2022 2:04PM ET
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The market looks more ahead, not only back. IMHO, hard to say really.
Ramesh Shah
Ramesh Shah Jun 27, 2022 2:04PM ET
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Bear mkts have 10% up moves to maul the bearish investors. Wait till Dec 2022.
patricio Silva
patricio Silva Jun 27, 2022 2:04PM ET
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