The stock market has been great to traders over the last seven weeks; will it last? This week has given traders many reasons to sell or get short the market from Swine Flu to some of the largest banks still needing more capital to continue operations. A few months ago, just the two events listed above would have dealt a crushing blow to the markets but we are not seeing the sell-off. So, is it time to buy?
Banks Dish Out Bad News But…
Friday, banks received the results of the stress test and after the close of the markets regulators shut down the First Bank of Idaho, which is the 29th bank to fail this year. Yesterday, information about the stress test results leaked out and apparently, Bank of America and Citi will need more capital to meet regulations. Even with the closure of another bank and more banks needing to raise capital, no real massive sell-off occurred.
Swine Flu Has Little Effect On Markets
This is probably one of the, if not the, biggest event so far this week that could have crushed markets. Although, the news of the Swine Flu affected the Mexican stock market, the US market seems to have shrugged it off. This could still have a huge impact on global markets and trade if the flu continues to spread but for now it is having little effect.
If the markets continue to shrug off bad news, it could present a great buying opportunity. Watch the S&P 500, if it gets above and maintains the 875 level, the markets could go for another leg up. At the same time, if news continues to get worse and as more information about the bank’s stress tests come out, a higher than expected unemployment number and other factors could push the market back down for a correction.
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