Last week, I questioned the conventional wisdom which claimed that there was Not Enough Bullish Sentiment?
It seemed that there were plenty of Bulls who looked at the 15% pullback in the S&P500 as an ordinary dip-buying opportunity.
In a moderate recession, an 85 day, 15% drop would likely be insufficient to reflect the changes in both growth and earnings — much less a deeper, more protracted recession.
The counter-argument is that the Fed has flooded so much cash onto the system, the recession no longer would matters.
Looking from a sentiment perspective, its hard to say that the we’ve seen the sort of fear that typically accompanies a lasting market bottom. There’s still plenty of speculative juice around. Consider these headlines from over weekend:
• Barron’s: Are You Ready for Dow 20,000 (this year!)
• Vince Farrell on We’ve Seen Our Bottom
• Barron’s cover story: Hitting Bottom? Several Banks and Brokerages Are Ready to Pop Up for Air
• Jim Cramer on An End to the Bear Market? and why this is A Turning Point
• Insiders, at Least, See Reason to Smile
• Just about anything at Forbes.
The closest thing to an admonition of caution was Barron’s Technical columnist, Michael Kahn, who called this The Market Bottom That Wasn’t.
That doesn’t mean we can’t see a decent bounce here — there’s lots of liquidity, and as we saw last week, the market stopped going down on bad news. That’s usually good for a 5-10-15% counter trend rally. We saw that begin last week.
But Dow 20,000 this year? I highly doubt it . . .
Okay, its Easter, and I know many readers have other things to do — but since this was such a topsy turvy week, with so much going on, I thought we needed to do at least post an abbreviated linkfest:
Day by day, the week gave credence to the belief that markets have no memory: Down 150 most of Monday, only to close up 21, then up 420 on Tuesday, off nearly 293 on Wednesday, and finally tacking on 261 on Thursday!
The gains were due primarily in belief that the Fed has the credit crisis under control, as interest rates came down, and commodities prices finally cracked.
Indeed, the Commodities were at the back of the pack this month, free-falling 8.6%, as Gold tumbled 7.9%, and Oil plummeted 6.3%.
Somewhat surprisingly, the European and Emerging market stocks got hit also, falling 2.4 and 4.3% respectively. In the US, the gainers were Nasdaq (+2.1%), Russell2000 (+2.8%), S&P500 (+3.2%), and Dow Industrials (+3.4%). The big winner were REIT stocks, up 7.9%.
In the coming week, we Existing Home Sales on Monday, followed by Durable Goods Orders and New Home Sales on Wednesday. Thursday brings the final Q4 2007 GDP, which now seems like it was years ago. On Friday, we get Personal Income and Outlays, and Consumer Sentiment.
Category: Financial Press