Stocks Returning to Normal?

by The Investment U Research Team

While breaking 1,000 may be a powerful psychological support level for the S&P 500, many technical traders will be watching to see if the market can move past 1,005. For technicians, this is a strong support and resistance level that, once breached, could see the market move quickly up another 90 points.

Bespoke gave us some clues to just how big some of the recent winners have been – their list of the top forty stocks shows the worst performer had a 400% gain.

Not bad for a recovery.

There’s still a lot of money on the sidelines, but many who have sat out the past four months are beginning to realize they may have missed the boat. From it’s low on March 9, the S&P 500 has climbed almost 50%. However, if it would climb up close to last year’s summer levels it would mean we have another 20% move ahead of us.

The news is starting to turn more positive, and even consumer spending is starting to (slightly) loosen up.

What does it means for markets? Well for starters, it means that volatility will still be relatively high. Profit taking will mute many big up days, like yesterday, as traders seek to lock in those gains.

But it will also mean that we as getting close to a normal market where stock picking and making correct investment choices will become important again. In March, you could have thrown a dart at the markets and found a stock that would move up by 50% or more.

Now we’re going to be moving back to a more competitive environment where earnings and performance matter.

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