It is extremely difficult to tell the situation in the stockmarket at the moment, with investors having faced a barrage of negative economic news, and with the CBOE Volatility Index at record highs, the volatility in stock prices will continue for a while yet.
However, volatility works both ways so any little piece of good news could bring a bounce to the stock indices if only for a day or few days.However, the overall trend is still down, as shown by the major indices such as the Dow Jones Industrial Average, the NASDAQ and the S&P 500 which are all still firmly entrenched below their 200 day moving average (it is a long term indicator indicating the health of the stock or index i.e. below the moving average is bearish and above it means bullish).
Thus the overall trend for the stockmarket is still definitely down unfortunately, however, as mentioned previously the intense volatility means that any good news could bring about a healthy bounce in stock prices however, it is difficult to predict exactly when this would happen.
In this sort of environment where investors are still jittery and the sentiment is one of caution and wariness, I would advise against hasty decisions to enter into buy trades since the volatility is still dangerously high and the overall trend of major stock indices is unfortunately down.I would recommend staying on the sidelines and see what happens next.
Investors have been hit by a seemingly endless stream of bad news lately, from disappearing jobs to shrinking retirement accounts, may feel some relief to hear that the Consumer Price Index which is a most closely watched inflation gauge, is predicted to fall by 0.5 percent in October, after being flat in September, it is released on Wednesday, according to economists’ forecasts.
Even with expected lower consumer prices, consumers have been cutting back sharply on spending because of the financial stress from job losses, shrinking retirement funds and declining home values.
The increasing unemployment moved the US economy into reverse in the third quarter. It is predicted that economic activity will continue to shrink through the rest of 2008 and during the first three months of 2009, which would define the US to be in a recession technically speaking i.e, two straight quarters where the economy contracts.
Another report out on Wednesday probably will show that the housing market continues to deteriorate as builders are expected to cut back on home construction, which is one of the economy’s weakest spots.
Also, US’s big three automakers were asking Congress on Tuesday for a $25 billion financial lifeline to save their faltering companies. The companies’ chiefs warned of economic upheaval and millions of layoffs if one of the companies were to collapse.