Markets tend to overreact in both directions on any given move. That is something I say here frequentl
Markets tend to overreact in both directions on any given move. That is something I say here frequently, but it has really been on view over the last couple of months. The collapse in stocks certainly looked justified as a massive chunk of the U.S. economy closed down earlier this year, but for a while it seemed that traders and investors had abandoned all hope and were ignoring the certainty that there would be a recovery. That move down now looks overdone. The question now is whether the bounce is also overdone, and this week, based on technical and fundamental factors we will probably find out.
One of the reasons charts are so useful to traders is that they take some of the immediate emotion out of reading a situation. This morning, for example, when you look at Dow futures indicating an opening of over four hundred points above Friday’s close and hear the encouraging news from Moderna (MRNA)’s phase one trials for one of their Covid-19 vaccine candidates, it is easy to think that the rush up to new highs is on.