» Stocks: Beware the Sucker's Rally
After a tough winter for the stock market, some signs of spring are appearing.It is looking much better this week. Commodities have somewhat corrected which is a good sign. But, be careful out there - 50-day moving averages are still pointing down.
The broad Standard & Poor’s 500-stock index jumped 5.12% from Mar. 18 to Mar. 25, while the battered financial sector has done even better. The Financial Select Sector SPDR (XLF) exchange-traded fund has surged 11% in the past five days.
Both measures are down almost 8% since the New Year, with the Financial SPDR down a whopping 21.7% in the past six months and the S&P 500 off 10.8%. But that just points to how welcome this recent rally is for depressed and anxious investors.
The U.S. economy’s slowdown and the financial crisis have battered stocks for months, but some market observers are now wondering if an end is in sight. Perhaps, with the recent collapse and bargain-basement buyout of Bear Stearns (BSC), stocks have hit bottom and investors can begin to put the bear market of 2008 behind them.
Not so fast, market experts say. Yes, there’s a chance the worst is behind us, but there’s an equal or better possibility the stock market is experiencing a classic “bear market rally,” they say.
