Has Wall Street rally gone too far?
Sunday, 20 September 2009
NEW YORK, Sept 19 (AFP): With Wall Street enjoying its best rally in decades, debate is heating up on whether the market has gone too far, too fast or is ready for a second wind.
Bulls and bears continue to slug it out: some say the economy is gathering steam and will keep the market on track; others argue this is still a "sucker rally" not supported by economic fundamentals.
In the week to Friday, the Dow Jones Industrial Average of blue chips advanced 2.24 per cent to 9,820.20, its highest level in 11 months.
The technology-heavy Nasdaq composite lifted 2.5 per cent to 2,132.82 while the broad-market Standard & Poor's 500 index vaulted 2.45 per cent to 1,068.30.
The gains since lows in early March -- 50 per cent for the Dow, represent the best six-month rally for the blue-chip index since 1933, according to finance professor Mark Perry at the University of Michigan.
The other indexes have also soared over the past six months - 58 per cent for the S&P and 68 per cent for the Nasdaq-although all the indexes remain well below their all-time highs.
Bob Dickey at RBC Wealth Management said it is likely the market can return to levels before the collapse of Lehman Brothers and other events last year that led to a panic. That could push the Dow to around 11,000.
Barry Ritholtz of the research firm Fusion IQ said his analysis suggests the rally has further to run.
"Based on history, which is no guarantee, we could be in the sixth or seventh inning of this rally, which means there still could be a ways to go."
Mike Shedlock at SitkaPacific Capital Management counters that investors hoping for a rebound have taken the market too far.
In the coming week, investors will scrutinize the statement from Federal Reserve, which holds a two-day meeting Tuesday and Wednesday. Although the Fed is unlikely to alter its near-zero interest rates, the document may offer clues about the central bank's plans in the coming months.
In the coming week, the market also will react to reports on new and existing home sales, and orders for durable manufactured goods.
Bulls and bears continue to slug it out: some say the economy is gathering steam and will keep the market on track; others argue this is still a "sucker rally" not supported by economic fundamentals.
In the week to Friday, the Dow Jones Industrial Average of blue chips advanced 2.24 per cent to 9,820.20, its highest level in 11 months.
The technology-heavy Nasdaq composite lifted 2.5 per cent to 2,132.82 while the broad-market Standard & Poor's 500 index vaulted 2.45 per cent to 1,068.30.
The gains since lows in early March -- 50 per cent for the Dow, represent the best six-month rally for the blue-chip index since 1933, according to finance professor Mark Perry at the University of Michigan.
The other indexes have also soared over the past six months - 58 per cent for the S&P and 68 per cent for the Nasdaq-although all the indexes remain well below their all-time highs.
Bob Dickey at RBC Wealth Management said it is likely the market can return to levels before the collapse of Lehman Brothers and other events last year that led to a panic. That could push the Dow to around 11,000.
Barry Ritholtz of the research firm Fusion IQ said his analysis suggests the rally has further to run.
"Based on history, which is no guarantee, we could be in the sixth or seventh inning of this rally, which means there still could be a ways to go."
Mike Shedlock at SitkaPacific Capital Management counters that investors hoping for a rebound have taken the market too far.
In the coming week, investors will scrutinize the statement from Federal Reserve, which holds a two-day meeting Tuesday and Wednesday. Although the Fed is unlikely to alter its near-zero interest rates, the document may offer clues about the central bank's plans in the coming months.
In the coming week, the market also will react to reports on new and existing home sales, and orders for durable manufactured goods.