In a prior post, we discussed what happens during a bear market, based on the four phases that Ned Davis Research (NDR) uses (oversold, rally, retest, and breadth thrusts). Since March 23rd, we have been in the rally phase, as the S&P 500 is up over 24% through the close on April 9th. In fact, compared to prior bear market rallies, this period has been the fastest to reach 20%+ returns from the bottom of the initial selloff (end of oversold phase).


This rally could be short lived as earnings season starts and investors get the first look at the impact the economic shutdown has had, how companies have responded, and what the future impact might be. From a market signal standpoint, it would be a positive to see continued improvements in the volume indicators and early cycle equity markets like small caps and cyclicals get back to new highs and maintain leadership. Without these conditions, the next phase is likely the retest.

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Copyright 2020 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers referto www.ndr.com/vendorinfo/.
Copyright 2020 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/.
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Senior Vice President, Investment Strategy
Boyd Watterson Asset Management, LLC