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Market Moves Higher

SPX Today

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As a follow-up to yesterday’s post, I wanted to update you on today’s activity in the S&P 500 Index.

We opened the day down after the news broke of only 140,000 new jobs being created last month and that the previous two months numbers were revised down 40,000 as well.  This news of a slowing economy, on top of yesterday’s PMI that showed barely positive manufacturing activity, threw the computers for a loop and they sold off the market.

But, as happens in an oversold market, dip buyers stepped in and pushed us higher throughout the rest of the day.

We closed at 1951 on the index, not too far from the 1965 level that tells us we have had a successful test of the August lows after a double bottom in the market on Tuesday.  If you remember from yesterday, we need to move 5% higher from the low to have a successful double bottom – and when that happens, statistically only 5% of the time does the market fall back to the lows.  Also, statistically, the average increase in the market is 40% from the lows – but just remember that is the average, not a guarantee.

With a slowing economy, the likelihood of a Federal Reserve rate hike is diminishing.  That is supportive of higher stock prices even if growth slows substantially – however, if we head into a recession, all bets are off.  The stock market does not like recessions, which almost invariably accompany bear markets.  And with interest rates already so low, there is no ghost of a chance the Federal Reserve will be a major factor in getting us out of the recession without additional quantitative easing (ie, printing money) which will have negative consequences of its own.

That’s all for now.  Have a great weekend and I’ll see you back here on the blog soon!

Mark