The Markets

The following chart says it all. S&P earnings over the last 20 months are down 90%. So why has the market been advancing for the last several weeks? In light of the market's rebound, many pundits are saying it has moved up too much, too soon. Personally, I think opinions are like noses...everyone has one.
The market didn't listen lat year when everyone was saying there's no reason for it to sell off as much as it was. So, it only makes sense that the market again will not listen to anyone and do what it damn well pleases...even if it flies in the face of common sense.

Te reason I bring these two points up is that there are important lessons to learn here. First, the market is independent and is really nothing more than the sum of millions of decisions being played out on a daily basis. Second, over time, we need to pay attention to the trends that are developing. And, third and more importantly, if the market sold off in advance of the 90% drop in earnings, maybe it is moving up in anticipation of earnings rebounding. I've said this many times before, the market is a leading indicator. It moves in anticipation of events. Last year is evidence of this.

The market has had a nice bounce up over the last several weeks. It would only be natural for it to pull back a little digest the gains posted. But we are moving into the historically slow period of the summer months. It would be equally reassuring if the market just trended sideways for a few months. This would give the averages time to catch up and provide a good base for the market to continue its upward climb.