It has been a great come back! Motivated by today’s crossing of DJIA of the 12,000 level, which with certainty is going to be heralded in the media, I wanted to remind a few facts. First, where were we before we get into this mess? We (DJIA) hit a level of 14,093 on October 8, 2007. Then we landed at 6,626 on March 2, 2009, and since then we have been going up and up until today we crossed the 12,000 mark. If you ask me where it is going to go, I will have to say that “I do not know”. However, it is more likely that will go higher than lower. Apart from the ongoing slow worldwide economic recovery, an important factor that can affect significantly the “near” future market returns is the positive feedback by the media. The index is climbing higher with no big hiccups and quite low volatility, VIX is at 16.71, a level we crossed, moving upwards, in July 2007 and we revisited in October 2007, as well as a few other times since then, which was the market’s high. For all these reasons, I see an upward movement in the overall market as being more probable than otherwise, even though the fact that we have not seen any serious disruptions in the up-trend makes me cautious. The market is back, good news come from a lot of directions, the news will be heralded, the hype may catch on again, the market probably will continue higher, but be cautious about when a correction, or a turn may come. The turn is not very probable. For it to happen, the bad news will have to be quite significant.
