As bad as the markets looked today — and at times, there was some heavy selling — the word that kept coming back to me was resilient. It looked as if buyers were under every bid, and that the market might even close flat today.
And why not? The Bulls will argue that new highs are bullish, the overall trend is upwards, that the credit crunch/housing debacle/slowing earnings are already well known, and therefore discounted by the markets. Besides, Tech looks great.
Then, there’s the liquidity factor: Through their repos (a/k/a M3),
Central Banks have injected plenty of liquid cash ($400B) into the system.
Bears can argue the economy is slowing and earnings are showing signs of disappointment. Market internals have been weak, with light volume on rallies and the advance decline line mediocre. Investors Intelligence shows bullishness rose to 60.2 from 56.5 last week (highest level since Dec 2005), while Bears fell to 21.5 from 25. The leaders are getting frothy, with Google (GOOG) now worth more than VIA, CBS, TWX and DIS — combined. On top of that, no one really knows how bad the financial sector is.
That is the question before you this evening: What beats what? Does economic weakness trump market momentum? Does a likely earnings slowdown trump trend? And does liquidity trump everything else?
What say ye?