Stock Market Enters Period of Indecision

Posted April 15, 2011

Longer- term, the bias remains to the upside for the major stock market indices. Near term, however, weakness continues and the short-term market action is giving mixed signals. In the chart below you can see that after hitting a new bull market high in February the S&P 500 stock index appears to have entered a trading range (1,250-1,344) to consolidate it's over 28% gain since September 1, 2010 and to evaluate the many concerns investors now have including: The impact of high commodity prices on the economy and inflation, whether governments around the world will responsibly deal with their rapidly growing deficits and national debt and whether either of these issues will result in very high interest rates that could act as the catalyst for the start of another bear market. That's the "bearish" case for stocks and if the odds favor that outcome in the weeks ahead we will have no choice but to reduce risk significantly in the portfolios that we manage. The bullish case on the other hand is that corporate earnings will continue rising and beating Wall Street forecasts for the majority of companies, that there will be positive resolutions to the aforementioned concerns and that the bull market will resume for the rest of this year after a temporary pause.

Click below to read more including the Longer-term outlook.

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