While the decrease in oil prices has to some extent soothed concerns about inflation, the U.S. market remains volatile and trading volumes continue to be disappointing. Investors and analysts who are searching for signs that the U.S. stock market has bottomed out are concerned that the significant changes in major indexes since the 2008 low on 15 July are an indication that the bottom has not yet been reached.
While welcoming any scrap of good news with regard to the market, analysts agree that much depends on the stabilization of the U.S. housing market and cutting back the mortgage losses that are being posted by the financial sector – but there is little confidence that this is going to be happening any time soon. That the market remains bearish is confirmed by the recent Dow Jones industrial average’s 300-point odd-day rallies. Each of these rallies, which amounted to a more than two percent gain, has been countered with notable declines, indicating that investors are latching on to any possible strength in the market and are also quick to sell at any hint of trouble. This seems to be all the more so if that trouble happens to be in the financial sector.
Of the major indexes, only the NASDAQ Composite Index remained above its 60-day moving average, finishing last week above its 200-day moving average, which is used as a long-term gauge of the resiliency of an index. The Standard & Poor’s 500 is down by more than 17 percent measured against its October 2007 record close. The index also remains more than 80 points beneath its 200-day moving average.
Moreover, although the decrease in the price of oil since the record high of $147.27 per barrel in July is good news, it is also seen as a cause for concern if it is an indication of a global slowdown.
Many agree that, as part of the vacation season, August is not a good month to gauge market trends and a clearer picture will likely emerge during September. However, the general view is that the absolute low of the market is still to come and investors should not panic-sell, but rather consider waiting things out for a while longer.
