Well, the big money seems to have jumped back in hard yesterday. Although the splash seems not to have rippled too far through today, it, nevertheless, was a mighty fine looking cannonball. I guess you could call it buying the dip. Those who have been waiting for the “right time” thought yesterday was it, and as the buying began, so did the “panic” about getting in. These kinds of market moves mean little, as we see in today’s market movement. Now, investors will sit back and assess.
The question becomes: where does the market go from here? Did yesterday’s leap forward tell us anything about the future of the market?
- In another bullish signal, small-company stocks rose even more than the rest of the market. Those stocks tend to be riskier than large, well-established companies but can also offer investors greater rewards. A sharp increase in small-company stocks means investors are more comfortable taking on risk. The Russell 2000 index jumped 22 points, or 2 percent, to 1,065. The Russell is 20 points below an all-time high it reached Oct. 1.
I find the above quite interesting. Money is flowing into riskier stocks, as opposed to defensive stocks. It would appear the market believes that 6-9 months from now, the Russell 2000 will have appreciated, which tells me the market has less doubt and more belief in the long term.
Another question that arises, though, is what happens after the US politicos wrap up their proud little feathers and start crowing about how they got what they wanted. In other words, what effect will all of this nonsense have on the market?
- The government closure could cause device makers such as Google (GOOG) and Apple (AAPL) to postpone the introduction of new smartphones and any other products that emit radio waves. With 98% of FCC staff furloughed, there’s no one around to give the final approval that says the devices don’t cause interference.
I don’t know how much effect the FCC will have on sales for Google and Apple, but the implication is clear, and there is no reason to doubt that overall effect will appear in the numbers for the third and fourth quarters, especially if the political theater has spooked US consumers.
- The final reading for the University of Michigan’s Consumer Sentiment Index for October was reported at 75.2, which was above the consensus reading of 74.8, but below last month’s final reading of 77.5. Note that the October reading was the lowest since May.
Certainly, the above reading is not dire, far from it, but it is not great either. It is in line, though, with what has been happening with the US consumer, as auto and home sales have shown for some time now.
Again, stay with the plan. Ignore the breathless media, as well as most analysts who have definitive negative conclusions about the market’s mid- and long-term future. Buy on the dips, hold on, or sell for quick profit, depending on what your strategy is.
Trade in the day; Invest in your life …
