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Jeffrey Gundlach Joins US Market Double Bottom Brigade

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  • Bond King Jeffrey Gundlach said that US stock markets might crash to March lows. Such a phenomenon is called a “double bottom.”
  • Gundlach isn’t alone in predicting a double bottom in US stock markets. Paul Tudor Jones and Mark Mobius also expect a similar pattern after the recent recovery.
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Jeffrey Gundlach on US stock market double bottom

DoubleLine CEO Jeffrey Gundlach expects a double bottom in US stock markets. In technical analysis, “double bottom” means a formation of two consecutive bottoms that are roughly at the same level. In simple terms, we can call it a W-shaped price action. Speaking with CNBC, Gundlach said, “I’m certainly in the camp that we are not out of the woods. I think a retest of the low is very plausible.” He also said, “I think we’d take out the low.”

Mark Mobius and Paul Tudor Jones also weigh in

Jeffrey Gundlach isn’t alone in his assessment that US stock markets would form a double bottom after the recovery. Mark Mobius and Paul Tudor Jones have also expressed similar views. Some brokerages like Citi sounded a note of caution over the sharp rebound from March lows. US stock markets have rebounded from their March lows and the S&P 500 (NYSEARCA:SPY) is only down 16% from its all-time highs.

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US stock market crash

Fiscal and monetary stimulus has driven the sharp rebound in equity markets even though economic indicators tell a different tale. The US economy has lost all of the jobs that were added after the Great Financial Crisis. While many currently unemployed individuals will get back to work after normal business operations resume, there’s still uncertainty about the length of shutdowns. Also, there’s the risk of a second wave of infections. Jeffrey Gundlach revealed that he has initiated a short position in the S&P 500 at 2,863 levels.

Jeffrey Gundlach is short on US stock markets

While Jeffrey Gundlach revealed that he’s short on markets, he added that his bet is much lower than in February when he “was very, very short.” When US stock markets crashed in March, several fund managers saw a buying opportunity. Bill Ackman said that he was very bullish. He added Hilton, Starbucks, and Berkshire Hathaway shares amid the US stock market crash. David Tepper was more circumspect. He advised caution after the US stock markets crashed. Read What Are Ackman and Tepper Doing as US Stocks Fall? to learn more.

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