Fear was out of control yesterday.
With an upcoming Federal Reserve meeting, the virus, fears of a slowing economy, and a potential default in China, the Dow fell more than 600 points.
According to Business Insider, “Some have suggested that if Evergrande collapses, it could be China’s Lehman Brothers moment, referring to the role played by the demise of the US investment bank in the 2008 financial crisis.”
It was the fuel on the bearish fire.
However, at the same time, that excessive fear created opportunity.
- Technically, the Dow was oversold at double bottom support. RSI, MACD, and Williams’ %R were all deep in oversold territory, telling us a bounce was imminent.
- Also, according to Fundstrat’s Tom Lee, people are talking about Evergrande and the spill-over being like Lehman [but] I’m in the camp that this is going to prove to be a really good buying opportunity,” said Lee, as quoted by Business Insider. “We’re at a moment where everyone’s only seeing darkness and downside and usually that’s when you want to be adding risk.”
- And, as we learned today, Evergrande is too big to fail. In fact, according to Ed Yardeni, president of Yardeni Research, as quoted by Business Insider, “”The reality is (Evergrande) is too big to fail, and I think the Chinese government is going to intervene big time. It will be restructured, and in a way, that won’t harm the economy too much over there and won’t affect the global economy or financial markets the way Lehman did.”
But don’t let your guard down just yet.
Even though markets are bouncing back today, there’s still a massive amount of fear.
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