Current State of the Stock Market
Feb 22, 2011
Posted by Jody Eisenman | Filed under Uncategorized
There is really not much to say about the stock market. There has been almost an orderly rise in stock prices on a daily basis. Usually, the pre-market futures are a decent indication of that day’s stock prices. However, since QE2, this has not been the case. If futures are up, the market stays that way. If futures are down, the market will almost always rally at some point during the day. Although I’m sure at some point the bears will have their day, I think it is pretty futile to try and call a top. Since December 1, the S & P 500 index has risen from 1180 to 1340. During this time, the DJIA rose from around 11,000 to about 12,400. However, what is even more amazing is that other than one day (January 28), there has no appreciable selloff of any consequence. While its’ true that corporate earnings have been generally better than expected, there have been many reasons for the market to selloff, yet it hasn’t happened. Many traders believe that will be no real decline until the Fed stops buying bonds. Personally, I don’t where the market tops out, but I do believe that the longer we go without at least some profit taking, the steeper the decline will eventually be.
Currently, the Middle East is in a state of political uncertainty. Already, the governments in Egypt and Tunisia have fallen, and several others may be on the brink. There have been demonstrations in several countries, most principally in Libya and Bahrain. In addition, there have protests and violence in Algeria, Iraq, Iran, Jordan and Yemen. While it is popular to call these demonstrators “pro-democracy”, I believe this is way too simplistic. Some may want democracy, but many simply have their own dreams of power, and many want a fundamentalist Islamic state. As many of these states are major oil producers, how this unrest could affect the economy is tough to gage. Over the weekend, the unrest in Libya has sent oil futures to over $97/barrel. In addition, stock futures are down over 1% since Fridays’ close. Whether this is the start of a decline or just another buying opportunity should become apparent shortly.
