All we needed was a bit more fear and walking out on the ledge of ‘market death’ to bring everyone back to reality.
All is well here on the homeland and in Europe again – thanks to that great little machine we call the printing press. I’m probably being a bit facetious but the investing world has never been driven by such activities.
Seriously, the economy here in the US seems quite a bit firmer than first thought. The data seems to support a slowdown but not quite the recession that has been talked about of late.
Across the landscape there is strong evidence of good business growth. Transportation companies talk about good business trends, retailers are reporting better than expected sales and industrial firms are shipping product.
China seems to be back in the game, Japan is showing interest and other nations are coming to the aid of Europe to help ring-fence their troubles.
These are just a few anecdotal lights fanning the flames of modest growth. We certainly have troubled areas, looking no further than financials and brokers, airlines and certain commodities. However, the stock market is telling us even these groups have been beaten too hard.
Going old school here!
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I have been watching volatility here for a long while (see chart). Friday got the move down I was looking for, a close below the key 30 level. Fear has been elevated since late July and hit a crescendo early that month, then tested the high early in October.
Is the reduction in fear warranted? I have no idea, rather would let the market tell me. The truth lies in the charts and this tells me fear is receding.
If that is the case then we can look for more funds to come into the market. What I’m hopeful is the days of gaps up and down have ended for now – the ‘mystery news’ that seems to steer markets up and down. Alternatives are simply not comparable to what can be achieved in equities – as an example Apple is up 15% in just about a week’s time.
As we head into a seasonally strong period for stocks we must be concerned about a market that moves too far too fast.
One of the characteristics of this market is the hyper fast moves of stock prices, steep rises and falls before your very eyes.
As the markets had their biggest week in just over a two years we are always cognizant that news can turn sentiment on a dime.
While it’s more fun to run run run as prices chase higher, that is probably a market in the past.
With the arrival of earnings season, the wheat will soon be separated from the chaff.
