Back to the Future: Where is the Market Heading?

backfuture_lWith this week marking the eighty-year anniversary of the stock market crash of ’29, Friday’s stock market sell-off may be leaving investors a wee bit nervous.

As usual, the quintessential question: where do we go from here? Here’s a sampling of today’s market chatter in the media about the recent stock slide and the future of equities.

Mark Hulbert of MarketWatch calls it a “stealth bull market.” His reasoning? During the mini market correction in July, the Dow fell just 3.3%.  If this pattern holds and advisers stubbornly hold their equity positions in the face of a modest pullback, then the rally could continue to climb a “wall of worry.”

Barrons’ Michael Kahn identifies several technical negatives that signal the rally is a losing momentum and a real correction is likely, including a break in the trend line (NASDAQ) from last March’s low and a potential double-top in the Dow Jones Transportation Average.

As Matt Phillips at the WSJ reports, end-of-the-fiscal-year adjustments by institutional mutual funds could be playing a role in the sell-off.

According to Bob O’Brien of Barrons.com, stocks are trading lower than their historic multiples in a low-inflation environment and, although other factors may keep prices in check into next year, economic and earning trends are in place for persistent performance.

Ron Baron of Baron Capital Group thinks stocks are cheap by historical standards and recommends holding on to stocks as an inflation hedge.

Art Cashin, floor operations director at UBS Financial Services, argues the market is “enormously” oversold and due for a bounce, as long as the dollar does not spike.

Arthur Hogan, Jefferies Managing Director, explains that October is typically the month for panics and the sell-off is an overreaction. He expects further consolidation next week (6% to 7%), with new money coming into the market, and a 5% bounce by the year-end.

As the old saying goes, talk is cheap. Let’s see what Monday’s market brings.
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