The markets have been stuck at 1,270 for three weeks now. The last three Fridays, the S&P 500 has closed at 1,270. (6-10, 1,270.98; 6-17, 1,271.50; and 6-24; 1268.84). That being said, there has been a lot of volatility each week prior to ending up at the same number.
The markets have been in a trading range since the first of March after enjoying a continuous, almost uninterrupted, accent from September, 2010 until March, 2011. Then the Japan tsunami sent the markets into a brief tail spin, only to recover again and then a gradual cancerous feeling slow spiral down since Mid March.
Sentiment remains low, now that the S&P has been down for 7 out of the last 8 weeks and economic data have been weak (some temporary, and some real). What is interesting is that for the first time in weeks, the economically sensitive sectors have outperformed the defensive sectors for the week, as consumer discretionary, technology, materials and industrials outperformed staples, health care and utilities. The lower price of oil will certainly help the consumer and corporate margins.
That beings said, it is probably too late to sell and perhaps too early to buy. It feels like the market will settle a bit lower that 1,270 and likely go up and down in the 1,250 to 1,300 trading range before it finds itself breaking out either lower or higher. We look for buying opportunities in great companies that have been beat up for no reason other than the market is struggling.
We believe that the gradual but slow recovery is continuing and that the markets will get back on a positive track, hopefully, towards the end of the summer.
Contact Richard Taylor for more information.