Stock Markets Recover After Initial Selloff

The S&P 500 fell initially during the trading session on Tuesday to reach towards the 4250 handle before bouncing rather significantly. By doing so, the market has shown itself to be extraordinarily resilient, but also extraordinarily volatile. Part of the reason we recovered was due to the fact that the West has shown how weak it really is and will only do minor sanctions against Russia at this point. Military confrontation seems very unlikely at this point in time and therefore markets recovered as a result.

S&P 500 Video 23.02.22

That being said, do not get sucked into any type of bounce, because quite frankly the markets are likely to have to deal with the idea of a slowing global economy, which of course is not going to be good for the S&P 500. Keep in mind that the Federal Reserve is looking to tighten monetary policy and a slowdown, so that is a recipe for disaster as well. Rallies at this point in time look suspicious to me, and I certainly would not trust them.

Furthermore, the market psychology has been broken rather hard, so I do think that it is probably only a matter of time before we see people taking profits rather quickly, or perhaps trying to fade rallies. Signs of exhaustion will almost certainly get jumped on, and of course we are not out of the entire “fear trade” at the moment. With that in mind, I think a little bit of a bounce makes sense, but I will be looking for opportunities to take advantage of them as I do not think there is a lot of conviction here.

For a look at all of today’s economic events, check out our economic calendar.