And just like that, US stock indices reach new superlatives –this time on the positive side. The Dow Jones Industrials Index closed up 1084 points to post its highest point gain in history. It was a 5% gain, the highest percentage daily gain since March 23, 2009, which coincided with the start of global QE policies and the beginning of the 10-year bull market. Today’s rally coincided with the S&P500 bottoming right at the 200-WMA as well its trendline support from the March 2009 generational low. The Premium long trade in the DOW30, released earlier this morning hit its final target for 600-pt gain. Interestingly, another 9% or 1200 pts in the DOW30 and the index becomes unchanged on the year.
Perhaps the lack of fundamental explanations for this monstrous rally is similar to the lack of fundamental explanations for the 10-consecutive daily declines in indices, which had never been seen in this millennium. After Monday’s slide, US Finance Minister Mnuchin announced he would convene a meeting of the Working Group on Financial Markets (also known as plunge protection team) to help stabilise markets. Combining the plunge-protection team with the arrival of 20% decline is a decent explanation for massive bids of the lows. Other news such as US and China announcing trade talks will resume next month. There will be further gains from here on, but I do not see indices hitting new highs. A recession by Q4 remains my base case scenario.
