Investors afraid of missing out are jumping back into equities

Posted May 10th 2009 11:40AM by Connie Madon
Filed under: Indices, Economic Data, Personal Finance, Oil

Wow! Did you know that the the Nasdaq has moved up to or beyond its 200-day moving average? If there's one number that turns traders on it is the 200-day moving average. It creates a new confidence that all is well and it's safe to jump back into the stock market.

We've had two months of steady gains, and now investors who didn't have the courage of buy at the low are in panic mode. They want on board. They want a piece of the action. This is causing more sustained buying. We are just about finishing the mess of bank "stress tests" and this is adding a sigh of relief for the banking sector.

In other markets, the U.S. oil price is at a six-month high above $58.00 per barrel. The Baltic Dry Index, which tracks commodity shipping rates, has risen 50% in less than a month. Government bonds, viewed as a safe haven, have come under pressure. Usually when stocks rise, bonds fall.

Now the question is, can the momentum continue? The markets become a bit tricky here. You have loads of people who are locked in just above these levels and will take every opportunity to get out. So from here on in, you will find a fair amount of resistance.

Then too, you have the overriding question: Will a solid recovery take hold here or are we in an up phase without the needed follow through?

Would you buy stocks at these levels?

Tags: Baltic Dry Index, bonds, economic recovery, Nasdaq, oil prices

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Reader Comments (Page 1 of 1)

5-10-2009 @ 8:01PM

william lindblad said...

Would or Should.
Contentious.
Those that fit the top line 60 days or more ago already know the answer. Those that are coming in at this point take a greater risk because the momentum could well be at a peak. Buying at what looked like an abyss level was a great risk but not as great as buying on an upswing that could easily fall apart. That is unlikely, but a fairly stable static condition in the 9000 range is much more probable. As you say, oil has taken a spike and the country still runs on it. The decrease from the oil highs of a year ago are only now reflecting on the grocery store shelves and if fuel costs reverse? Well, it goes right back and with all of the other turmoil, we can add inflation. Ultimately, it will wall depend on the consumer, credit flow and some kind of stabilization in the banking sector. Without this, failure is imminent and the bears will return to Wall St.