It’s hard enough to track the volatile swings in the U.S. stock market, without having your brain scrambled even further by the ever-fluctuating “insights” of the mainstream media.
Case in point: On Friday March 27, the blue-chip indexes pushed toward their biggest monthly advance since 1991, with the S&P 500 alone enjoying its sharpest 10-day gain since Franklin Roosevelt was President.
That’s the what. As for why -- the usual suspects didn’t exactly see eye-to-eye on the matter. Enter the day's headlines:
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“Speculation that the government efforts to… end the recession will work boosted stocks. I wouldn’t be surprised to see this rally take the S&P up to 1,000. It’s been one data point after another that’s come in better than expected.” (Bloomberg)
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“Geithner’s recovery plan helps the market… There’s finally some confidence that the administration has its arms around the problem in the banking system.” (AP)
-- VERSUS --
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“Stocks Rally Offsets Growing Gloom.” (Reuters)
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“Despite weak reports, stocks surge. Investors have accepted the first quarter of the year will be dismal and factored it into stock prices.” (Washington Post)
Sorry Charlie, but you can’t have a financial market rise in anticipation of economic recovery AND an economic fall at the same time. That said, despite their glaring (and physically impossible) differences, the usual suspects did agree on one thing: The ongoing upside in stocks.
Yet -- on March 30, Dow Jones Industrial Average led the way D-D-Down in a powerful, 248-point selling spree. The “S&P up to 1,000”? Try back below 800. And, while the usual folks were unprepared for such a sharp and sudden turnaround in the market, the March 27 Short Term Update strongly considered the odds for a drop.
In Short Term Updates own words:
“A bit of digesting (i.e. a pullback) would not be out of order… What isn’t conjecture is the severe overbought condition of 10-day NYSE TICKS. Monday’s close was the most overbought since March 21, 2007, which was also the forefront of a near-term pullback after the initial leg up from a solid market low (March 14)… a subtle clue that a larger pullback is now developing.”