Daily Investment Interpretations

October 22, 2010


2010-10-22 (Friday Night):   The markets ended mixed. The NASDAQ Composite ratcheted up 19.72 points (0.8%) to 2,479.39  The Dow lost 14.01 points (-0.13%) to close at 11,132.56, and the S&P 500 tacked on 2.82 points (0.24%) to end at 1,183.08. Oil dipped to  $80.64 a barrel, while Gold shrank to $1,326. The VIX fell 0.49 to 18.78.
    My investment advisory service hovered on the edge of a "buy" signal today, but the markets didn't quite trigger it. We'll see what happens on Sunday night.
    In charts: The week's economic indicators  
    Stocks, complacency near highs  Nick Godt writes, "Itís not just the stock market thatís revisiting levels unseen since April: The Chicago Board of Options Exchange Volatility Index, which gives the pulse of the market, is trading near its lowest levels since the spring. Last week, the VIX /quotes/comstock/20m!i:vix (VIX 18.78, -0.49, -2.54%)  otherwise known as the marketís fear gauge, sank below 20 for the first time since May 3 and it closed below 20 for the first time since April 29. When the VIX drops below 20, it typically signals complacency is rampant in the stock market. Bad news is brushed aside, and stocks react to any news thatís not ďas bad as fearedĒ with a rally. Weíre not there yet. The VIX sank to its lowest level for the year, near 15, in April as stocks continued to cheer the belief, back then, that the global economic recovery was for real, until a crisis in Europe forced a correction and a reassessment of reality. Of course, stocks bounced back on Wednesday as the VIX fell back below 20. We are in earnings season and, much more importantly, the market is now assured that the Federal Reserve will soon provide more liquidity to try to offset a slumping economy and deflationary pressures. After all, stocksí rebound since July has come in the face of mounting evidence that the economy is slowing, making it more and more likely that the Fed will delivery another round of its so-called quantitative easing measures. The central bank wonít meet until early November. That gives plenty of time for the VIX to continue to fall. And it might be just when the liquidity is delivered that the cup will overflow."
     The Fed will meet two weeks from Tuesday.