The S&P 500 was down 1.8% on Friday. I had to go all the way back to 11 August 2010 when the S&P was down 2.8% to find a bigger down-day. That just makes the point that the markets have had unusually low volatility recently - especially since the first week in December.
I love how the pundits always have an easy explanation for cause of the market moves. Friday’s explanation was the turmoil in Egypt. Perhaps it was; but if there was a significant concern about riots expanding and affecting oil supplies, would the turn down have been so small? Ford also had a significant miss on its earnings and that too may have caused some jitters.
Good news was ignored: The Commerce Department said GDP expanded at an inflation-adjusted annual rate of 3.2% in the fourth quarter of 2010. It was 2.6% GDP growth in the third quarter. Consumer spending rose 4.4% in the fourth quarter, about double the pace of the prior three quarters and resulted from the best holiday retail sales since 2006.
Our 5-day moving average of sentiment is up to 53% Bulls. The %-Bulls was 63% at the close on Friday so a lot of people are buying the dip (through options). These are elevated numbers, but by themselves, do not portend a downturn.
The Navigate the Stock Market computer analysis threw up some red flags, but it is still in a “HOLD” so I haven’t sold yet. I’ll be watching closely next week.
