Did We Just See The Correction Lows?

The markets ended a wild session on Friday with sharp gains. After opening higher, then plunging lower, successfully testing trendline support (not to mention the 200-day moving average), the markets then raced higher as strong buying came in to ultimately finish near their highs by the close.

The markets have had a fast and furious correction. Long overdue I might add. But it was rooted in profit taking and technical trading and nothing to do with fundamentals.

That is why I think the chances are good that we may have just seen the lows of this correction on Friday. That does not mean we won't see additional selling pressure or more down days. But I believe we quite possibly saw the lows of this correction.

There's been a lot of talk of potentially seeing the economy overheating, which would cause inflation, and a larger rise in interest rates. But, as I've said before, that's wildly premature. I put zero credence in that narrative. But that narrative does persist.

What will quash that narrative is the next Fed meeting in March. If the Fed raises rates as expected by a quarter point and essentially sticks to the well broadcast '3 hikes this year' talking point, the interest rate hike hysteria will have been debunked and stocks should once again be off to the races.

In the meantime, I expect stocks to trade in a broad range between the highs from a few weeks ago and the lows we just saw on Friday. But I would also expect plenty of bargain hunting this week after Friday's impressive performance. Many stocks are trading at levels not see since Q4 of last year. Lots of great stocks at great bargains. That was evident on Friday and will be quite evident this week.

Expecting a fun week in the market this week. There will definitely be volatility. But the days should be much more rewarding.

Enjoy,

Kevin Matras

Executive Vice President, Zacks Investment Research

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