Friday, August 7, 2009

S&P Breaking 1000 is Bad News

The S&P finally broke 1000 points but the question remains as whether it is sustainable. There is still some resistance in the early 1000's and if the market can break through, there may be more upside remaining.

However, there is still a lot of money on the sidelines. Many people with deep pockets have remained on the sidelines as the March bottom roared past leaving those who were influenced by the gyrations of the market gasping at the rear end smoke.

From the low on March 9, the S&P 500 has climbed almost 50%. This is an amazing recovery and just goes to show how nobody can time the market.

With more positive news each day, it seems like the movement in the market may not yet be finished. Consumer spending is up, pending home sales is up and the unemployment numbers are not as bad as expected.

This means that the market will be volatile for some time until there is certainty that the worst is behind us. There will be big days followed by profit taking and vice versa.

It's a market that will be hard for both value stock investors and growth investors. Contrarians may benefit from special situations as the strategies employed do not necessarily require market movement for pieces of the puzzle to fall into place.

The point is that had you bought absolutely any 10 stocks blindfolded, or just gotten a monkey to throw some darts, you would have made some big gains.

But now the whole game changes.

Fundamentals are critical. Bottom up analysis vital. DCF valuation and stock picking ability ever so important.

This article was written by Old School Value You may email questions or comments to me at


  1. OSV,

    I think you are correct that fundamentals are key at this point in the market cycle.


  2. There sure is lots of money on the sidelines, presumably waiting for bargains. If the S&P dropped (say) below 900 as of the end of October, it would leave a lot of egg on a lot of faces.


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