An Incredible Run
Mar 19, 2010
Posted by Jody Eisenman | Filed under Uncategorized
The Standard and Poors 500 index, as measured by the Exchange Traded Fund (ETF) known as the spider (symbol:SPY) finally closed lower today. Although it was only a six cent drop (from 117.10 to 117.04), this marked the first time since February 23 that this ETF had a losing session. I believe this has never happened before. Meanwhile, the Dow closed up 45 and a half points, marking the eighth straight session the index has closed higher.
By almost every technical measure, the stock market is overbought, at least short term. However, markets can stay way overbought or oversold for extended periods. Witness the beginning of 2009, where the markets dropped consistently, day after day, until we finally bottomed about a year ago. Although a pullback would hardly be surprising here, I think that the end of the quarter is keeping stocks higher. In other words, since the equity markets have advanced so much this quarter, any mutual funds and money managers that are not substantially invested will tend to do so before the quarter ends. This is due to the fact that they only show their investors their quarterly positions, and they don’t want to show them that they are sitting on the sidelines when the market is moving higher. The VIX volatility index is down to 16.62, which is the lowest close since May of 2008. The index hit almost 90 in October 0f that year.
