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Volitility, and More of The Same November 11, 2011

Posted by Tom in Thoughts.
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From all of the news comments this week, quite a lot has happened.  But has it really?  “Not So Much!”  Last Friday (Nov.4) the S&P 500 closed at 1253.23, this Friday (Nov.11) it closed at 1253.23; up a whooping 0.85% (yes, less than 1%).  The incredible thing that nearly everyone focused on were the significant up and down moves, in some cases, the very next day.  The net weekly result was really rather O.K. and doesn’t appear exceptional.

This volatility is of course driven by news.  Europe continues to drive markets world-wide on almost an hourly basis, even through the weekends.  Overall, I would call this a weak market because it is easily driven by news or even rumor.  A strong market is not effected much by news.  The other thing that concerns me is volume (again).  If you take a look at the Friday volume (Friday, Nov.11) it is anemic . . very low, while the price soored.  What gives?  I don’t know and I don’t feel that comfortable with going “all in”.

This rather clearly indicates that there are many folks out there that are waiting, and are not going to commit major funds into this market until the storm clouds begin to break up.  What to do?  Watch for stocks and sectors that are showing more consistent strength (continue to increase in price) while this market gyrates up and down.  If you need to be invested, that’s the place(s) to be; and these will likely show even more strength IF the markets improve.  The reason is that these areas may be under “quite accumulation”.  institutions could be starting to take small positions over a period of many days if not weeks.  If the markets don’t improve, you’ll have a clearly defined price to exit your positions; basically, where you bought them.

Don’t feel confused.  I was at a conference in Chicago this week with over 60 money managers, and they are just as uncertain as you are.  In this environment, driven mostly by news, anything could happen.  Good or bad.  We must be prepared for both.

Have a good week.

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