The panic selling of last week has turned into panic buying this week. The stock market that couldn't stop falling last week now seems impervious to downside. In human form this market would have a serious case of panic disorder, treatable, but possibly disabling. In stock market form, all this patient needs is a few kind words from a Central Banker to soothe its soul.
These wild moves signal instability and uncertainty in the market. After all when a market is functioning properly you shouldn't see wild price swings. There should be slow and steady price discovery. Of course it helps when the wild moves are to the upside.
Despite all the carnage left in the wake of last weeks sell off, broken charts and trendlines, the current buying pressure is impossible to ignore. Once the stock market hit its record high in September the sentiment of the market changed.... each move was a sell the rip opportunity. That selling reached a fever pitch last week. When stocks finally did bottom last week, we have seen the dips get bought again.
Since the lows in March 2009 every dip has been a great buying opportunity. So far the lows last week have proven to be just that. This market can get panicked, but keeping your cool in this market and buying those 'panicked' dips have worked out wonderfully the last five plus years. It also helps knowing you have central bankers on your side to soothe the market when it gets panicked.
