It’s Wall Street’s version of an inquiry that might be fielded by a parent on a long car trip: Are we there yet?
In this case, the there refers to the bottom of a stock market that had seen year-to-date gains for the Dow Jones Industrial Average DJIA, +1.65% and the S&P 500 index SPX, +1.86% briefly erased this week and pushed the Nasdaq Composite Index COMP, +2.68% into a correction, usually defined as a drop of at least 10% from a recent high, for the first time in about two years.
Presently, there isn’t a consensus for what lies ahead for U.S. equities, which had been punished in an October that had proved to be as painful as historical statistics foretold.
However, Wednesday’s action, a spillover from Tuesday’s rally, might imply that the market may be out of the woods. The Dow was trading up by nearly 400 points at its intraday peak, while the S&P 500 was in ascendancy, and the Nasdaq was powering higher as well (and out of correction, if you are an avid CNBC watcher, even if that isn’t possible).
Upbeat quarterly results from Facebook Inc. FB, +4.56% , which put aside fear of further woes in so-called FANG names, which have been key to the overall markets stretch of repeated all-time highs, and strong private-sector labor-market data have helped to support a buying mood — for now.
So, here’s a brief rundown of the bull and bear case for the next phase of the market.
The bull case
Tom Lee, managing partner at Fundstrat Global Advisors, in a Wednesday research note said one reason for the two-day rally that is under way is conditions in the market that had placed many of the stocks on U.S. exchanges in oversold positions. “This makes sense — we are massively oversold. A 10% decline in 20 days is a 2 standard deviation event,” he wrote.
Lee pointed to a number of so-called oversold conditions that have prevailed amid this October selloff, including breaches below the closely followed moving averages at 50 days and 200 days. However, he has recommended that investors...