A “Show-Me” Market

By seadmin

The way I am approaching this market, you’d think I was born and raised in Missouri. That’s because the "Show-Me" state’s famous motto of skepticism is how I think any smart investor should respond at this critical market juncture.

In last week’s Alert, I told you that many of my radio show listeners and many subscribers to my various advisory services have been asking me just what direction I think this market will take. Well, over the past few days the questions I’ve received have been more along the lines of "is the correction over?"

Certainly, the market has shown signs of being a lot more stable of late. In fact, we actually bounced off of the 1375 level on the S&P 500, a level I told you last week was the real key to determining if we would descend into a full-blown bear market or just remain in merely a correction phase.

One glance at a chart above of the recent wild ride in the S&P 500 clearly shows that rebound from the 1375 level. This recovery is encouraging news for the bull camp, especially because stocks have fought their way back to the all-important 200-day moving average (red line).

The way I see it, if the S&P 500 can continue fighting its way back above 1490, we might be able to declare the end of this recent correction. As I write this Alert, the S&P 500 is pushing its way back to 1460, so the direction is certainly positive for the bulls.

The Fed now has come to the aid of the market, first with its injection of billions of dollars in liquidity and then via last week’s 50 basis-point discount rate cut — a cut that should set the stage for at least a 25 basis-point cut, if not 50 basis points, on the more important federal funds rate when the Fed meets again in September.

I say that the jury is still out on the direction in stocks, and I think that even if the worst is now over, we are likely to see a lot more volatility over the next month or so. When it comes to calling the bottom on this market, I’m adopting Missouri as my home state and simply saying, "Show me!"

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