The #MysteryBroker weighs in after Friday's bounce to say it "likely" marked the low for the current phase of the downturn, sees 4-6-week rally totaling 8-15% in S&P 500 based on some rare oversold indicators and persistent bearish sentiment.
The #MysteryBroker notes the extensive history of S&P 500 declines that ended just short of 20% (as I detailed last week - '90, '98, '11, '18), saying the crucial variable that determines if such a drop goes much further is whether a recession hits within months. He thinks not.
The #MysteryBroker says his base case for 2022 has been a low in October (fitting the mid-term election year pattern,) but a chance last week was the low in part because so few believe it and the key bearish factors (rate-hike expectations and inflation) might well have peaked.
Certainly there have been a couple deeper declines than 20% without a recession. The #MysteryBroker doesn't think 1987-type conditions apply (massive rate shock + high valuations). Could have perhaps 4% more downside than 20% this time, as in 1962, to further compress valuation.
The #MysteryBroker nods at the chance of earnings-forecasts slipping - as some see happening in the second half of 2022 - but he believes that will be more of a 2023 story.
That's it for now. Note the way the #MysteryBroker stuff works.
https://twitter.com/michaelsantoli/status/1126487466540617728
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