The Coming Week: Market Feeling No Pain After Shots of Good Economic News
The old thinking that sneaked back into the market these last few weeks has some staying power. Other rallies of this type in the last eight months had been tossed onto the curb after only two shots of tequila.
This rally has a stronger stomach, many market watchers say. Investors are beginning to shift from simply hoping that the gains witnessed in equities aren't compacted within the span of a couple of hours to thinking about maintaining rallies. They're also starting to react positively to positive economic data.
"Psychology is turning: We're trading at a level where we can hold on to positions for a longer time without a blowup," said Sam Ginzburg, director of equity trading at Gruntal.
The bullishness isn't overwhelming anybody, but pessimism has been beaten back. Whether the rallies advance is grounded in theoretical stuff such as valuations and more base concerns, such as Friday's
Disrespecting the BingUntil the economic data can be sufficiently parsed, however, the market might spend some time combing through some of these individual rallies. Strategists believe technical levels are going to be tested to see whether there's enough established demand at the current levels on the S&P 500 and the Nasdaq Composite Index to warrant further rallies. The S&P 500 closed Friday at 1253, not far from where it stopped out on April 18, when the Federal Reserve surprised the market with a 50-basis-point interest-rate cut. The Philadelphia Stock Exchange Semiconductor Index is currently trading over the key level of 600; whether it can remain there depends on how well it can withstand whatever selling pressure reaches into the market next week. Not every stock and every sector deserves a 25% gain in the span of three weeks. "We're in a sorting-out process," said Richard Cripps, chief market strategist at Legg Mason in Charm City (Baltimore, for the non-Homicide fans). "Stocks seemed to have bottomed, but there aren't enough earnings to get investors excited." The factors that motivate sellers, besides the opportunity to take profits or to build on a short position, are limited next week, however. There's still a fair amount of bearish sentiment in the market -- but earnings are winding down and next week doesn't offer much excitement on that front. With the exception of PC maker Hewlett-Packard (HWP), due out Monday, the biggest names on the dole are Emerson Electric (EMR), Cigna (CI) and some consumer products companies, like Newell Rubbermaid (NWL). As long as earnings aren't terrible, people seem to be able to feel all right.
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