Recession or Recovery
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When the stock market drops 16% down it scares many investors, especially when the dramatic days of the last market crash are still fresh in the memory of many retail and institutional traders. It has been less than two years since the stock market dived, I would say, into second (after the first one stock market crash in 1929) scariest fall in the history of financial world. There are still traders who did not recover or just partially recovered from 2008-2009 run down and the current 16% slide down must have put doubt in the thoughts of many.
In summary, there are two main things that makes may traders to worry about current stock market condition.
The first point is the crisis in the European Countries. Big debt obligations and possibility of government bankruptcy scares many investors all around the world. It is not a new thing a country is declared bankruptcy. The history already saw such thing. The new and the scary thing is that at this moment, it is not one country and not two countries. Several European countries are facing strong debt trouble and the fear exists that it can start chain reaction which could run down even strong countries. United States is not an exemption from the rule. The big debt does not look like to become smaller and is as a black cloud hanging on the horizon and ready to turn into a tornado.
The second thing is that stock market recovered very fast and very strongly from the 2008-2009 recession. Many indexes (Nasdaq 100, S&P 500, Dow Jones Industrial, Nyse Composite, Nasdaq Composite, etc) went up to their 2007 high levels just in a year. From one side it could be a nice news, however, by taking into account that this stock market recovery has not been supported by the recovery in the U.S economy would make many investors cautious whether this run up was just a game of the institutional traders who decided to make extra fast profit while the new government is trying to implement some additional regulation that would restrict some investments actions from the side of the big institutional banks. So, there is a possibility (at least in the mind of some investors) that the current recovery could be just a bubble and we should be facing at least several years of depression. And the fact that the stock market is far above the bottom of the 2008-year recession should be rather a negative trading signal.
As you see there are strong conditions that make many investors to be sceptical about bullish stock market. I do not want to state that the Wall Street may face another crash, yet, at this point there are no factors that on my opinion would predispose the market to move up in a long term. |
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Author Resource:-
Find out about technical analysis of different indicators applied to the S&P 500, NASDAQ 100 and DJI to create trading systems for stocks and ETFs trading.
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By :
Viktor Ka
Submitted
2010-07-09 11:30:58 |
Article From Article Mayhem
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