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Markets opened up 4% this morning as yesterday gave us some hopeful numbers. Italy, Spain, and the U.S. reported drops in the daily amount of new coronavirus infections and deaths.
Traders are grasping at this reduction as a sign that we've reached the bottom, and it's a straight shot up from here.
I'm afraid that's just a load of "hopium." In fact, if you look back at the last few weeks, Sundays often have lower numbers. Presumably some numbers get reported on Monday instead as even in a middle of a crisis, some people need a break.
But that's the Reality Gap we're going to be seeing right now: between people looking at one day's slightly better numbers as a sign of hope, and the economic reality of real, deeply negative numbers ahead.
Look, the Dow is down more than 25% this year and we're already in April. It's perfectly understandable that people are starting to look for the recovery. No one wants to miss out on the rebound.
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But the reality is that a single day of not-as-bad numbers doesn't necessarily make a peak. We may be hitting the top of the growth curve of new infections and deaths (and like everyone, I certainly hope and pray that this is so), but we could also be seeing just a one-day respite in the data.
In either case, the market bottom won't come around for a while yet.
Because hitting the apex of the curve would mean that the worst of the medical problem is almost over.
Here's When to Expect a Market Recovery
About the Author
D.R. Barton, Jr., Technical Trading Specialist for Money Map Press, is a world-renowned authority on technical trading with 25 years of experience. He spent the first part of his career as a chemical engineer with DuPont. During this time, he researched and developed the trading secrets that led to his first successful research service. Thanks to the wealth he was able to create for himself and his followers, D.R. retired early to pursue his passion for investing and showing fellow investors how to build toward financial freedom.