— by Mitchell Clark, B. Comm.
I have to say that I’m amazed at the price strength in the broader market. Bad news doesn’t seem to faze this market and that’s a really bullish sign. I certainly thought we would get more of a consolidation in stock prices over the last couple of weeks, but the market has proven me wrong.
The correlation between the stock market’s recent advance and its previous collapse is amazing. Not that there’s anything scientific about it, but if the current trading actually is a mirroring trend, we’ve got a lot more upside ahead.
A lot of benchmark companies are looking good in this market. Companies like Hewlett-Packard, United Technologies, The Home Depot and Intel all are displaying solid upward momentum in their stock prices. Trading volume is low right now, but that’s a seasonal trend that will soon change. For the most part, a lot of benchmark stocks are looking very healthy at this time and that’s a bullish signal for investors.
I still don’t have any defined outlook for the stock market and I think this is a feeling shared by a lot of Wall Street analysts. Anything can still happen in this market. The case can just as easily be made for a big retrenchment in stock prices as it can be for further gains. As we all know, September and October can be wacky times for stock prices and a little shakeout from recent gains wouldn’t be a bad thing in my view.
The biggest news so far in this stock market recovery has been the performance of large-cap stocks. A lot of solid, dividend-paying companies have returned solid gains in the last six months. I think that this trend will continue, as institutional investors plow money back into the market.
One important sector where the recovery in stock prices has been pronounced is the financials. Bank of America and JP Morgan Chase have done extremely well considering that the industry was facing collapse just a short time ago. In a sense, the bailout to the financial sector did work; but it was costly and the national debt is feeling the pain. If you pull up a one-year stock chart on JP Morgan Chase, you’ll see that its stock price has recovered almost entirely back to where it was before the financial crisis took hold. This is a major accomplishment in my view.
So, the action among large-cap stocks is very positive and this makes it much more likely that the broader market will keep ticking higher over the near term. It certainly is an interesting time.