Reading headlines of ‘how bad’ the state of our economy is and how its prospects continue deteriorating for the worst by the minute…; I gotta admit – it is really discouraging. It sounds panicky and sort of more in line with: “World, today we face a conflict even more daunting in its dangers and scale, a challenge unlike any previously faced by humanity in any age. It is, in the truest sense of the phrase, an existential conflict – between humankind and the mortgage lenders“. C’mon, let’s ge real here. But as laughable as this is , one can’t deny its effect though. Once you read stuff along these lines, there is a tendency in thinking ….well , perhaps the market is in a freefall after all…. However, when you re-evaluate, all indicators suggest a better stock market than those headlines imply.
The dire headlines caused a few sharp sell-offs in the past month, but those headline writers fail to mention that those sell-offs ended up nowhere. For all intents and purposes, the stock market as measured by the S&P 500 has been locked in a tight trading range since late January. The Vix index coincidentally did back off from its Jan highs thus suggesting that traders/investors are gaining more confidence with stocks. Worth noting is that – this scenario is quite encouraging and much different than the panicky liquidation we saw in the first few weeks of January. But, getting back to the S&P range was talking about……that trading range has been very narrow defined by about 1320 levels on the downside and 1380 on the upside. So it seems the market has settled into a trading range for now. However, for it to breakout and develop a rally ; we will need the participation of the financial sector which should get a boost for the next little while as the stimulus package flows towards its direction. I am hoping the end of the current spate of negative economic statistics should run its course hopefully within the next month.
