1. Oil would need to head back to $50/barrel. This would alleviate major concerns over oil company debt. The move would need to happen quickly to avoid major defaults. The time frame would be in the next month. If oil shoots back up, the banking stocks would jump higher as investors stop worrying about how much exposure they have to the impending defaults.
2. Janet Yellen would need to give the pause signal for future rate hikes for the remainder of 2016. This may happen if the US stock markets continue to stay shaky and the global recession continues to worsen.
3. China infuses a massive stimulus package that starts seeing growth return. Any uptick in economic data in China will send the world markets soaring. In addition, it would add fuel to a commodity rally.
4. Investor sentiment gets so bearish, a short covering rally could be epic and cause the markets to retest and break the highs. Investors, realizing they are on the wrong side, jumping back on the buy side.
While intriguing to think about, the likelihood of these things happening in the near term of maybe 5%.
Gareth Soloway
InTheMoneyStocks