The stock market wants to embarrass the experts

Ines Ferré
·Markets Reporter
·3 min read

Bears looking for a retest of the market lows may soon have egg on their face.

“Depending on how the market plays out over the next couple of days, this might be all she wrote in terms of a retest,” Sam Stovall, chief investment strategist at CFRA tells Yahoo Finance.

He says we may have already hit the bottom as the conversation shifts from coronavirus cases to reopening the economy.

“I see the bottom on March 23, but then I look and I've seen, we've already had one semi retest, where in a sense we've pivoted, come back down a bit, and then worked our way higher. We're going through that process once again.”

The Dow (^DJI) is up 26% from its 52-week low, while the S&P 500 (^GSPC) is up 25% from its low on March 23rd. On Thursday The Nasdaq (^IXIC) closed above its 200 day moving average for the 2nd time in three trading session as Amazon (AMZN) and Netflix (NFLX) reached all time highs.

The rebound comes despite a backdrop of weekly unemployment claims in the millions, a historic plunge in retail sales, and the biggest drop in manufacturing since 1946. Goldman Sachs predicts GDP in the U.S. will shrink a whopping 24% in the 2nd quarter, and rebound in the 3rd and 4th quarter.

Over the past weeks analysts and investors have warned we are not in the clear yet and to watch out for a ‘bear market trap.’

“So many strategists are calling for a retest that Mr. Market will try to embarrass the greatest number of strategists at any one point in time,” said Stovall.

[Read more: Stock market news live updates: Stocks jump amid COVID-19 treatment optimism, economic reopening discussions]

A brown bear cub plays on the road in the outskirts of Sinaia, 140 km north of Bucharest, June 15, 2009. Local authorities and members of the Forestry Institute started an operation to capture and relocate about 25 bears after many started to roam in the town in search for food. With half of Europe's brown bears - roughly 6,000 - living in the Carpathians mountains environmentalists and authorities are struggling to keep the wild animals and residents in mountain towns safe from each other. REUTERS/Radu Sigheti   (ROMANIA ENVIRONMENT ANIMALS SOCIETY IMAGES OF THE DAY)
REUTERS/Radu Sigheti (ROMANIA ENVIRONMENT ANIMALS SOCIETY IMAGES OF THE DAY)

‘The market is just thrilled that now we're talking about reopening’

On Thursday President Trump laid out guidelines for reopening the economy. The plan defers to governors the reopening of their state economies. Governor Cuomo of New York has already extended the state’s shelter in place orders until May 15.

“The market is just thrilled that now we're talking about reopening because that re-establishes the opportunity for some sort of a V-shaped recovery,” says Stovall.

The debate among strategists on what the shape of the recovery will look like has been ongoing. One BMO strategist says investors should stop trying to guess the shape of it, that the market still has to digest through the rest of earnings season. This week big banks reported quarterly profit drops as they set aside billions for expected loan losses.

”If we end up seeing some sort of an improvement in earnings estimates as the year progresses, then I think, you know, we could actually be seeing a positive second half,” said Stovall.

[Read more: Coronavirus: Personal finance tips, news, policy & more from Yahoo Finance]

Ines covers the US stock market from the floor of the New York Exchange. Follow her on Twitter at @inesreports.

Read more:

It would be unprecedented for a bear market to be this short: Wells Fargo Strategist

Recent rally could be a ‘bear market trap’: Miller Tabak Strategist

A view from the trading floor: Algorithms having ‘outsized impact’ amid coronavirus impact

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.