If our crazy stock markets have you scratching your head, don’t feel alone. As the chart below illustrates, the Dow broke out of the recent trading range to the downside in the first week of October, only to be followed by a strong rally to the top of the trading range as this is written.
I continue to believe that events in Europe will be one of the main drivers of the equity markets just ahead. There is now talk that the EFSF bailout fund will be increased to 2 trillion euros, but I will believe it when I see it. The European debt crisis is far from over!
Another upcoming driver will be the success, or lack thereof, achieved by the so-called “Super Committee” which I wrote about at length in my E-Letter on Tuesday. The Committee’s deadline is November 23, but its members are already asking for more time. Look for this issue to keep the markets volatile just ahead.
10 Market Myths Debunked
Investors bailed out of the stock markets in droves during the summer, especially in late July and August as the markets tanked. Most have no idea whether they should get back, while others say they will never get back in. One thing is for sure: the investment environment is changing.
There are several fairly recent developments that are leading to a lot of changes in the equity markets. One is the significant increase in “high-frequency trading.” Another is the influence of ETFs that have to “rebalance” their portfolios near the end of the trading day, just to name a couple. Both have played a role in the markets becoming SO VOLATILE this year.
Brett Arends, a financial writer for The Wall Street Journal, wrote a very interesting article earlier this month in which he debunks a lot of long-held beliefs, or “myths” as he calls them, that are attached to the stock markets. I have a link to the article below.
I found it most interesting that the very first myth he debunked is the tired old argument that you can’t time the market. I’ve known that myth was untrue for years and have developed a very nice business of finding those professionals with time-tested systems for timing the market. While Arends refers to market timing methods we don’t use, the point is, it can be done successfully.
I won’t steal Arends’ thunder any further. If you are an investor or if you are interested in the markets, I think you’ll find his article interesting:
http://online.wsj.com/article/SB10001424052970203388804576612640599187106.html
Cooler But Drought Continues
Our weather has cooled off here in Texas, it was near 40 degrees at our house this morning. It looks like the 100 degree days are over; we broke the record this year in Central Texas with 84 days above the century mark, including several days over 110.
The severe drought, however, continues. Some parts of Texas got a little rain a couple of weeks ago, while most didn’t. The long-range forecast does not look good. Lake Travis where we live continues to fall, now over 50 feet below its normal full level. So we’re still praying for rain.
Have a great weekend everyone!
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