This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Of Course This Market Can Go Down

NEW YORK ( TheStreet) -- As major U.S. stock indices reach new highs with no meaningful correction since last October, investors seem to believe that this market can never go down.

Last week, the Dow Jones Industrial Average (DIA) briefly broke 15,000 for the first time, while the S&P 500 (SPY) closed above 1600 to set a new record.

The drive higher was fueled after the European Central Bank cut interest rates and by a better-than-expected nonfarm payrolls report on Friday. For the week, the Dow climbed 1.8%, the S&P 500 gained 2% and the Nasdaq Composite (QQQ) gained 3%.

The last time the S&P crossed 1500, the previous century landmark, was in March 2000, just before the dot-com crash that started soon after. So let's take a look at the scorecard of the bull vs. bear case from here. Can this market ever go down again?


Bull Case

1. Intense global central bank support from the Federal Reserve, European Central Bank and Bank of Japan as they continue quantitative-easing measures in an ongoing attempt to kick-start the global economy.

2. Earnings reports, while not spectacular, were enough to hold up the major indices during this earnings season that's just ending.

3. Investor sentiment, which seems bullish (maybe too bullish) and the "buy the dip" mentality still rule major stock indices.

Bear Case

1. A definite and significant global slowdown is under way. Recent economic reports from every corner of the world, including Japan, China, Europe and the U.S. confirm the deceleration under way, and this can only add downward pressure on corporate profits over the coming months.

2. A stagnant U.S. economy. While the nonfarm payrolls report was celebrated on Friday, 165,000 new jobs is pathetic in the historical scheme of things, and underlying indicators such as hours worked, underemployment and low-paying jobs making up the bulk of the gains dampened the overall significance of an "improving" labor market.

3. Seasonality: "Sell in May and go away" is a widely known phenomenon, and its accuracy has been well proven over time.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
QQQ $110.96 1.61%
DIA $181.52 0.64%
SPY $212.70 0.95%
AAPL $132.04 1.87%
FB $80.55 1.53%

Markets

DOW 18,162.99 +121.45 0.67%
S&P 500 2,123.48 +19.28 0.92%
NASDAQ 5,106.5930 +73.8420 1.47%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs