The markets have surged in the new year and the index S&P 500 posted its best January in the last more than 30 years. Investor optimism has recently been fueled by higher-than-expected earnings season and the Federal Reserve's decision to pause interest rate hikes for the near future.
The S&P 500 rose over 15% from its December low. Jason Hunter, JPMorgan's technical strategist, said that new highs could be on the way. "It is obvious for someone who casually looks at charts, there was a very clear well-defined support through most of the year and then a fairly violent breakdown in December."
Given the recent rebound, Hunter noted that it reminds him of the movements in 2000 and 2007. "The rebound we are currently seeing is the same as that of 2000 and 2007, but it's worth noting that this price action is outside of bear market environment." Historically, when markets are deeply oversold, as they were in December, the next 6 to 12 months have a positive lean.
"We are in the uncomfortable position to decide whether this is bear market rebound or part of a sustained move and we will see a new peak of the cycle before entering into a recession –driven environment. Unfortunately, there is no big difference between the price action in a bear market, or in a bull market in a volatile environment and we must therefore observe the other indices."
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