FX Evolution: Are Stocks About to Enter a Short Squeeze?
Following a rough back-to-back drop for September and October, markets historically start to calm down in November. The month tends to see gains on average, and sets the stage for stocks to rally in the final weeks of the year.
The 2023 autumn decline has sent stocks into correction territory. That’s a bit more than the average of the past few years, but is in line with longer-term market trends.
However, that could set the stage for a quick and fast rally. It may even have the feel of a short squeeze.
For long-term investors, a correction tends to happen once every 1.5 to 2 years. That makes for an ideal entry point. This year, the market has heavily punished defensive stocks like utilities and consumer staples.
That could mean a reasonable buy for stocks that play to those sectors. They tend to have slow but steady growth, and also tend to pay above-average and growing dividends.
In the meantime, tech stocks, which have led the markets higher overall this year, aren’t looking like a clear buy yet. There could be some more down sessions next, particularly for the popular large-cap names.
However, once those stocks form a base, they could also join other sectors of the market and trend higher.