It’s Too Soon to Trust Stock Market Rally amid Bearish Trend

By CCN Markets: With reports indicating that the new trade deal with Mexico secured by the U.S. has some specifications that are not fully agreed upon by both countries, the prospect of the U.S. stock market has slightly declined in the past several days.

The Dow Jones is down 0.23 percent on the day, falling below 26,000 points. | Source: Yahoo Finance

The Dow Jones has slipped by 0.19% on the day, falling below the 26,000-mark following strong recovery from 25,522 to 26,197 at the week’s peak.

However, according to Jason Hunter, the Head of Global Fixed Income and U.S. Equity Technical Strategy at JPMorgan, the current rally of the U.S. stock market may not be strong enough to be sustained throughout the short term.

Bearish Indicators Surrounding the Stock Market

On the technical side, Hunter emphasized that the breakdown of the S&P 500 during a phase in which trend indicators including moving averages were signaling large movements initially indicated a bearish trend in the market.

He said:

“It’s a little bit of good news and bad news situation when we look at the charts [of the S&P 500]. So the market traded in this broad pattern that it broke down from in late May, which has pretty bearish implications, particularly if you look at the way the trend following signals were set at the time and the number of moving averages; the market broke down through those at a time wherein the news story wasn’t looking that good, which could have generated a lot of downside momentum.”

In the past week, the stock market has demonstrated a solid rebound as a result of the speculation around the possibility of the Federal Reserve potentially decreasing the benchmark interest rate by July.

While bullish momentum could build on top of the recent recovery of the stock market, Hunter emphasized that the market is currently driven by headlines and that geopolitical uncertainties make it less compelling for investors to chase for the rally. Hunter added:

“This has been a very…

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