The One Day Wonders Ahead

With market declines of recent days, we may be at the start of the second down leg in the stock market and economy that I have been forecasting.

Please note these market down legs come with what I call "One Day Wonders", after a series of down days, the market will stage a strong advance for generally not more than one day, before returning to the downtrend.

These "One Day Wonders" are nothing more than rebounds from technical overbought situations, i.e., when you have a series of down days some of the selling is by short term traders, rather than liquidators. A liquidator to me is someone pulling money out of the market completely, a short term trader may be out and on the sidelines waiting for the downturn to be over and planning on jumping back in. Not realizing the downturn may be extended, they jump in at some light weight signals, all the short term traders see the same signals to get in at what they think is the start of a new bull market. Thus, these "One Day Wonder" days. Unfortunately for them, they are buying from liquidators who are draining cash from the market and then the downturn resumes.