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The Rollercoaster Continues


The chart above shows the past 10 days on the S&P 500 Index. I’ve drawn a pink line on the chart showing the market’s attempt to break above the 1100 area, only to have the bears take a stand and push the market back down.

This has been a very volatile period, with big swings up and down that have had investors on a sentiment rollercoaster. The key to this will be if the bulls can push the index up through the 1100 resistance level. If so, and if earnings continue like those announced this morning – we can see a move to the 1140 area that should cause the market to move into a trading range pending further news.

Earlier in the earnings season, I gave you my view on this blog that based upon the Harpex Shipping Index which tracks movement of goods across the Atlantic, we would likely be surprised on the upside by business activity in Europe in spite of all the negative news on the Euro. Well today, we had that surprising news: European PMI (an index that tracks manufacturing activity) was well ahead of expectations; Retail Sales in the UK were ahead of expectations, particularly in big ticket electronics; and as more and more banks pass European stress tests, investors are believing that the debt crisis is contained.

Earnings overall have been good so far this earnings season, in spite of the fact that the minority that have been less so are getting so much press. Thus far, 85% of companies reporting earnings have been ahead of analyst expectations with average earnings growth of 55%. This is the sort of thing that makes stock markets go up.

I really wanted to include the Red Hot Chili Peppers official video version of this song from the Beavis and Butthead movie, but upon seeing it again after all these years I decided it was a bit edgy even for this blog. If you’d like to view it yourself you can easily find it on YouTube.