A Series of Battles

Bear markets often feature a series of battles, even relatively shorter-term duration ones like 2008. We had bear market rallies from March-May 2008, then a pedestrian one over the summer, and even around the time Lehman failed and TARP was passed in September we had ridiculous, convincing squeezes which shocked and scared even the most ferocious of bears.  

Longer duration bear markets, like 2000-2002, feature endless drips down for months at a time, while the 1966-1982 secular bear featured alternating bull and bear multi-quarter cycles within that time period. And then 1929-1933 featured the 1929 crash, followed by years of trapping those who bought said crash by heading much, much lower. 

As for the here and now, we touched and reversed around the arbitrary 20% threshold on the S&P to make the bear market "official" yesterday, which got tons of media hype.

We did close relatively well yesterday, however, and now we are getting initial follow-through higher this morning which is enough to back me off the short side temporarily.

The short side in stocks, that is. 

If we do sustain another bear market rally into the June FOMC, a good month away, I suspect we will see energy and rates rise in tandem as those markets begin to squeeze The Fed to be even more aggressive fighting inflation than the 50 basis points Powell has been touting for both the June and July FOMCs.

My macro views aside, both energy, many oil stocks, and rates are all in strong technical uptrends. And let us not forget about gasoline prices via the UGA ETF printing fresh highs on a daily basis, squeezing the consumer as Powell laughs off the notion of raising more than 50 at a time. 

Hence, rates are still at risk of exploding much higher, against The Fed's wishes as they would love to see the market hold rates on the 10-Year Note around current levels or lower. But we may have some time go before the economy officially falls into recession, possibly not until 2023. 

Thus, as gas and oil (and softs) push higher amid other supply issues, inflation is not going away anytime soon. Stocks may get little breathers here and there, but this is most likely just a lull in between ongoing battles.