We can expect the headlines to look quite bleak in the coming quarters, but we must keep in mind that it is not unusual for stocks to bottom well before the economy and social mood. An investor who held stocks while the headlines above appeared in his daily paper was rewarded with a nice profit.
Positive Signs - Maybe Something To Build On :
- The stock market already knows GDP numbers are going to be weak in the coming quarters, which is a big reason stocks are down roughly 40% from their all time highs.
- While valuations could get more attractive, they are currently near 18 to 25 year lows.
Investor and public sentiment is extremely pessimistic (a contrary indicator). - The VIX ("fear index") is near all time highs (a contrary indicator).
- The number of new highs vs. new lows made on the NYSE last Friday was off the charts bearish, showing a very strong desire to sell stocks at any price (which can be bullish for the future).
- The October 10, 2008 lows held up during last week's retest.
- Thursday's close was impressive and came on strong volume.
- Stocks made money last week.
- LIBOR has come down indicating some improvement in the credit markets.
