The Rise of the Machines (MSFT, NOG)
Now, since I mentioned fundamentals, that's the place to begin our discussion of what's happened to the stock market lately - and what we should be doing about it.
As I wrote yesterday, analysts and strategists alike are on record saying they do not want to lower earnings forecasts for stocks. They typically cite the fact that companies have steadily grown earnings, even when economic data weakens, like last summer, when economic data was so weak, the Fed began the bond buying program known as QE2.
Where are Stocks Headed?
Back in the Spring, the S&P 500 ran from 1,050 to 1,210. It was virtually a straight line. There were no meaningful pullbacks to buy. Even a dip of 5 points quickly reversed.
I had taken to calling that stock market rally the "bulletproof" rally because it simply would not reverse...
Are the Sellers Done?
So far this year, the S&P 500 has dropped 3% or more in one session 3 different times. The two previous times, it clawed back some of the losses over the following week. We’ll have to wait and see of there is any upside after yesterday’s big drop.
The S&P 500 is now testing the lows from the “flash crash” on May 6. This is interesting because it was assumed that trading that day was something of a fluke as computer trading programs went haywire. But now that stocks are back to those levels, we must consider that the drop may not have been a fluke.
The question now is: can stocks find some strength? Or perhaps a better way to ask the question is: are the sellers done?
