Why Panic ?
Everywhere you go, whether it’s a Little League game or a cookout, people are whining and moaning about the market. It is especially true of the casual investor. Many of this group is also predicting some sort of crash or sharp fall in the market in the near term. My memory tells me that some of these same people were very upbeat during the monster tech rally of the late 1990′s. Others in this group also felt comfortable buying stocks and mutual funds when the market already rallied off of the bottom during our last big decline in 2009.
So what is this telling us ? It obviously shows that people are scared. It has become evident on the OTCBB, where with the exception of a few hot penny stocks, the volume has been weak at best. A stock like Distribution Management Services (DMGM.PK) may have risen more than 75% yesterday, but many other stocks recommended by some of the top penny stock newsletters traded relatively light volume. In other words you have had to be spot on to make money on the long side in this market.
On the large cap side there is a better rationale for the weak volume. Every year people are somehow baffled when the action is light in August. Did I miss something. Did PM’s and hedge fund traders all of a sudden stop vacationing in the late summer. Vacation isn’t the whole reason for the tepid trading, but it has certainly contributed to the absence of buyers.
On the other hand, major corporations are doing the exact opposite. Stock buybacks are happening on a frequent basis and M&A activity is already above the rate of the prior two years. Just keep in mind that if S&P 500 companies are willing to invest at these levels things probably are not as bad as they seem.
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