It's a Conundrum

Stocks are finally showing a willingness to ease up on their bull run, if for no other reasons than to do some much-needed technical consolidation and to digest the latest news. You might say they are pausing to take in the view from these lofty heights—especially the Nasdaq, which hasn’t seen this level since 2000...when it was moving rapidly in the other direction.

Quintuple Witching Economic Indicator Week

The stock market is behaving extremely well from a technical perspective. And why not? The world seems stable enough to give investors the confidence to maintain a “risk-on” allocation. Sure, there is still plenty to worry about. But more and more, investors are growing bolder. The Dow is at its highest level since 2008 and wants to challenge 13,000. The Nasdaq is at its highest level since 2000. 

Jobs

The stock market has continued its bullish ways—thanks to indications of an improving U.S. economy and diminished concerns about Europe’s economic stability. The S&P 500 finished January up +4.4%, while the “riskier” Nasdaq finished the month up 8.0% and the MSCI Emerging Markets Index gained 7.7%. Yes, investors are boldly embracing the “risk on” trade. 

Uncertainties Cloud Market's Progress

We still don’t know what the market wants or what it will get. The market continued inching ahead, up about +0.40% over the last 5 days, but it was down sharply this morning for a loss today.

Bulls found fresh legs on Wednesday with support from the FOMC, despite the reluctance of Greece to “play ball” with its creditors, which has been depressing investor sentiment. Everyone seems to agree that the unresolved debt crisis in Europe is the main thing holding back global economic recovery and the snorting stock market bulls. To be sure, the situation in Europe is not good.

For better or for worse, as investors we are generally suckers for a good stock recommendation. Trouble is, we frequently end up getting suckered by that very same “sure thing.” Well, doing one’s own due diligence is a reasonable antidote for bad counsel. On the other hand, what about those rare cases when the due diligence behind the proffered equities has effectively been done?