This week saw something we hadn’t seen in a few months – a big down day and no dip buyers in sight. Was it time to panic? Well, not totally – but it certainly raised an eyebrow.
Remember, going up is a slow, methodical process. Going down is quick and vicious. The old saying, you take the elevator up and the window down. Perhaps selling into the down day was premature.
After all, Wednesday’s range was only 10 handles on the SPX, even if it was down 25. The market needs to be reset at times and the longer it goes without some selling then it becomes a game of chicken – who gets out first and will others follow or dare the market to drop.
I don’t like playing that game, I’ll leave it to others.
One of my alltime favorites – hope you like it, too!
The economy is showing some good signs of growth. The recent data tells us this quarter is shaping up to be a decent one, perhaps another 3% GDP is in the works.
There are still a few weeks left but demand for products and work is still robust. The recent jobs report put job growth at a level not seen in years. A 200K+ growth for a third straight month is impressive given the many restraints/regulations on businesses, not to mention the headwinds from higher gas prices, election uncertainty and continued surprises from Europe.
China may be slowing a bit but so is their inflation (and targets), which opens the door for more easing. Other BRICS (Brazil and India) cut rates or reserve requirements this week.
The market doesn’t seem to be in bad shape, has been taking news in stride (good and bad). However, under the surface there could be some warning signs.
The recent selling has been on elevated volume – four distribution days in eight is notable. The recent new highs are becoming scarce – that’s not so much of a problem as markets digest a big up move. However, the VIX shows complacency and with stocks at new highs that is an opportunity to sell them.
The obsession with Apple and the extreme upside move rekindles memories of absurd moves back in the dot.com era (no, I’m not comparing Apple to theglobe.com or pets.com…the infatuation and fascination is similar).
Again, I don’t see much to be worried about yet, the market is seeing good economic times over the next few quarters, Europe may skirt a big time recession and there is plenty of backstopped liquidity ‘just in case’ (call it the Bernanke put option).