Is the Bottom In Yet for the Stock Market?
Is the bottom in yet for the stock market? It looks that way for now. This week's correction could prove to be just that - a correction, rather than the start of a bear market. Remarkably, that could mean that the cyclical bull market that began over five years ago will continue.
Keep your eyes on the small cap stocks, as we've mentioned before. The index is $RUT and a good proxy would be the ETF IWM. Both have rallied after breaking below support, but haven't quite pushed above resistance yet. (Note: When an item falls through support on a chart, that support then becomes resistance as the item tries to climb back up. That's what we're talking about here.)
Also, let's see if the Dow remains above 16,000. When the average fell below 16,000, it didn't stay there very long. And while breaching 16,000 could have pointed to further falls, the fact that the average turned around so quickly may temper this. So the next few sessions will probably give us what we need to see if the Dow will settle down, at least for the time being.
We might also legitimately wonder whether the support at 16,000, the rally in the small caps, and the bear deciding to go back into its cave (if that's what does in fact occur in the coming weeks) might be the first hint that a purported Republican victory in the November elections may indeed come to pass. A victory would consist of the Republicans holding majorities in both the House and Senate, leaving Obama not just a lame duck, but the lamest of lame ducks. The reason that the market would react positively to such news would be the possibility that some of the more egregious policies, like Obamacare, might be in some way turned back or at least tempered in some way. Obamacare drains the energy of an already anemic economy, so any relief from the strain would prove positive and that would provide reason for stocks to head back up again, at least for the near to mid-term.
Longer-term, one really has to strain to find an economy that's truly turned around since the shock of 2008. Sure the headlines from Wall Street's economists continue to beat the rhythm of "recovery." but these guys dance to a different drum when it comes to an understanding of the economy that anyone not in upper echelons of our society might understand. The rich have gotten richer, the poor, or poorer, have derived some benefit from programs like extended unemployment, welfare and Obamacare, but all those in the middle continue to see their salaries decline on an inflation-adjusted basis, a trend that's continued now for decades. And despite repeated announcements that wages are going up, or will be going up, few have actually seen that happen.
A final thought about the stock market: I wonder whether the both the violent action this week and the current whipping back in a positive direction might be the exaggerated action of programmed trading, rather than any indicator of what used to be known and the "collective wisdom" of the stock market. But that's a subject that hasn't been settled one way or the other yet. It remains, though, a consideration.
Keep your eyes on the small cap stocks, as we've mentioned before. The index is $RUT and a good proxy would be the ETF IWM. Both have rallied after breaking below support, but haven't quite pushed above resistance yet. (Note: When an item falls through support on a chart, that support then becomes resistance as the item tries to climb back up. That's what we're talking about here.)
Also, let's see if the Dow remains above 16,000. When the average fell below 16,000, it didn't stay there very long. And while breaching 16,000 could have pointed to further falls, the fact that the average turned around so quickly may temper this. So the next few sessions will probably give us what we need to see if the Dow will settle down, at least for the time being.
We might also legitimately wonder whether the support at 16,000, the rally in the small caps, and the bear deciding to go back into its cave (if that's what does in fact occur in the coming weeks) might be the first hint that a purported Republican victory in the November elections may indeed come to pass. A victory would consist of the Republicans holding majorities in both the House and Senate, leaving Obama not just a lame duck, but the lamest of lame ducks. The reason that the market would react positively to such news would be the possibility that some of the more egregious policies, like Obamacare, might be in some way turned back or at least tempered in some way. Obamacare drains the energy of an already anemic economy, so any relief from the strain would prove positive and that would provide reason for stocks to head back up again, at least for the near to mid-term.
Longer-term, one really has to strain to find an economy that's truly turned around since the shock of 2008. Sure the headlines from Wall Street's economists continue to beat the rhythm of "recovery." but these guys dance to a different drum when it comes to an understanding of the economy that anyone not in upper echelons of our society might understand. The rich have gotten richer, the poor, or poorer, have derived some benefit from programs like extended unemployment, welfare and Obamacare, but all those in the middle continue to see their salaries decline on an inflation-adjusted basis, a trend that's continued now for decades. And despite repeated announcements that wages are going up, or will be going up, few have actually seen that happen.
A final thought about the stock market: I wonder whether the both the violent action this week and the current whipping back in a positive direction might be the exaggerated action of programmed trading, rather than any indicator of what used to be known and the "collective wisdom" of the stock market. But that's a subject that hasn't been settled one way or the other yet. It remains, though, a consideration.
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