Courtesy of Daniel Sckolnik, ETF Periscope
“It’s not wise to violate rules until you know how to observe them.” — T.S. Elliot
For the majority of 2012, the market has been acting like a fairly reasonable creature, as opposed to the nervous and jittery beast that dominated Wall Street for the second half of 2011.
Since December, when the European Central Bank finally came up with a big enough “bazooka”, in the form of its Long-Term Refinancing Operation (LTFO), to address the Eurozone banks liquidity crisis, investors have pivoted with rather surprising speed from risk-off to risk-on.
The result has been a strong and steady uptrend in the equity market, which has sent the key indexes soaring to heights not experienced since the financial crisis hit full force back in 2008.
In spite of the fact that the Dow Jones Industrial Average (DJIA) shed about 20 points on the final day of last week’s trading calendar, it is certainly worth noting that the Dow just finished a run of seven consecutive sessions that concluded in the black. For those who keep score of such streaks, it has been over a year since the Blue-Chip Index ran off that many winning sessions in a row.
Of greater significance perhaps is the fact that the benchmark Standard & Poor’s 500 Index (SPX) managed to remain above the psychologically significant 1,400 level, as it reflects a broader cross-section of the equity market compared to the far narrower DJIA.
Reflecting the high correlation of the European bourses with Wall Street, Europe’s equity market has also been seeing some of its best overall performance numbers in over eight months, when the fear of Greek contagion became the elephant-sized blip on the radar of concerned investors.
On Friday the SPX stayed above the 1,400 level it hit just last week, the first time since May 2008 it topped that lofty number. Meanwhile, European stocks hit their highest level since before the market’s slump in late July.
That investors are feeling more confident and less skittish at the moment can also be seen by a quick read of the VIX (Chicago Board Options Exchange Market Volatility Index), which is often referred to as the “fear gauge.” It continues to trade at the very bottom of its 12-month range, even hitting numbers that it hasn’t visited since 2007.
Some observers see this current round of…
