Tuesday, August 30, 2011 9:18 am EDT
DJIA: 11,539.25 S&P 500: 1210.18
Yesterday’s 254-point surge was on light volume, primarily due to the fact a lot of investment professionals couldn’t get to work due to Hurricane Irene.
The surge would have had more credibility if it came on heavier volume.
What’s important here is, buyers were able to move the market with relative ease, suggesting a lot of prospective selling has already taken place.
When it comes, good news will have a significant impact.
Stabilization in the highly volatile European sovereign debt situation is needed, for one. A meaningful proposal to create jobs by President Obama in his post-Labor Day address is another.
The biggie, of course is the economy. It has hit a soft patch leading many to conclude a recession is in the wings. If it becomes obvious that this is just a slowdown, the bull market is back.
For the longer term investor, stocks are attractively priced and institutions are obviously buying, just not reaching. With a lot of selling out of the way, these behemoths will have difficulty accumulating positions without running the stocks of choice up.
Deterioration in the European economies and debt situation, coupled with uncertainty about the U.S. economy stand to trigger another leg down to DJIA 9,680 (S&P 500: 1050), or so.
Like I said Friday with the DJIA at 11,149, the market can go 1,000 points either way.
In the interim, expect enormous volatility.
Today: Yesterday, I said a high volume breakout above DJIA 11,550 (S&P 500: 1210) was needed by the bulls. The S&P hit that level, the DJIA fell short by a smidge. Those levels turned stock prices down sharply on August 17, giving them credibility as resistance levels that must be penetrated by the bulls. But the market is up sharply in two days and without breaking news, needs a rest. This raises the possibility that a near-term breakout of these levels without a consolidation first is suspect.
The writer of Brooksie’s Daily Stock Market blog, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk
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