Market Mood Swings Back to Elation: Will the Good Times Last?

 By Aaron Task in Investing

After a three-day slide sliced 0.9% off the Dow’s recent rally, buyers rushed back into stocks Friday as Wall Street saw its fourth straight week of gains. Stronger-than-expected reports on U.S. durable goods and German business confidence were cited for spurring the advance, as were extremely bullish comments by famed hedge fund manager David Tepper on CNBC.


The S&P is on its longest winning streak since April, according to Bloomberg. Furthermore, the S&P has broken above 1,130 (it ends the week at 1,148), a  technical victory for the bulls. But its close below that in the last session — along with light trading volumes – has some investors questioning whether this is sustainable.


As Henry and I discuss in the accompanying clip, what’s interesting is how quickly and dramatically market sentiment has swung during the course of this multi-month trading range. Although there have been alternating moments of elation and despair in between, the S&P is currently back to where it was in mid-January.


Perhaps this current moment of elation will prove to have more staying power, but it’s hard to argue that the problems that got us into this mess have been resolved. Earlier this week, Spanish Prime Minister Jose Luis Rodriquez Zapatero declared: “The debt crisis affecting Spain, and the euro zone in general, has passed.”


Let’s hope Zapatero is right, but consider me highly skeptical. This is the kind of statement that typically comes before the fall, and echoes Ben Bernanke’s infamous comment about subprime being “contained” in 2007. Notably, Irish bonds took a hit following a steep drop in its GDP less than 48 hours after Zapatero’s declaration.

Meanwhile, gold continues its decade-long rally, hitting an intraday high of of $1,301.60 per ounce early Friday. As with Treasuries, gold continues to defy its skeptics. If recent bubbles in dot.coms and housing are any indication, gold probably hasn’t peaked yet, but any asset that “can’t lose” typically does – in a big way.

Source: Yahoo Finance


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