Why Market Correction May Not Be Over Just Yet

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Stocks Analysis by Lance Roberts covering: S&P 500, Alphabet Inc Class A, Apple Inc, Alphabet Inc Class C. Read Lance Roberts's latest article on Investing.com

slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.agency debt and agency mortgage‑backed securities at $35 billionOf course, the reversal of QT means a buyer of Treasury bonds is returning to the market, increasing overall market liquidity. It also means the Treasury will issue $105 billion less in gross in Q3.

The stock rally is at a critical juncture, and what happens next will determine whether the current market correction is over. Three possible scenarios over the next month or so exist.While this path is indeed possible, the markets are overbought on a very short-term basis,Path B: Many investors were surprised by the recent market decline. As such, these “trapped longs” will likely use the current stock rally as an opportunity to reduce risk.

Combining current sentiment, buybacks, and liquidity hopes makes the stock rally over the last two weeks logical. Furthermore, given that early summer months tend to be bullish for markets during election years, it is likely too soon to be overly bearish.

 

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