Great discussion on the main page thread on GDP today. I'm very glad to see it and hopefully it means there is an audience for a diary on the market and there will be some discussion in the diary in the future when kos doesn't have eceonomic news on the front page.
The market opened pretty strong today off the GDP figures. However, it did not open as strong as some the pre-market activity indicated and started giving back the gains qucikly. There was a nice intraday rally back to the mroning highs indicating that the dip buyers remain powerful. The late day selloff was pretty mild in my opinion.
The modest reaction to the GDP news was partly the result of the fact that the 7% plus figure was not as unexpected as the media made it out to be. In the bubble years, earnings were measured against "whisper numbers." These estimates reflected the true consensus as opposed to the published consensus. I have read a number of economists recently who suggested a 7% plus number was possible but whose forecasts were lower. In other words, I believe informed investors did not see the GDP as a positive surprise but more or less in line with expectations with slight upward bias. The market had moved all year in anticipation of better economic news, so today's news was greeted less enthusisatically than it might otherwise have been.
I discussed performance anxiety in a prior post and I still think this will drive the market higher over the balance of the year. Many investors have missed this rally or been in the wrong stocks. Sell-offs are met with buying from these investors and the momentum traders quickly get things moving as the trend toward new highs has been in place since spring. The market has a come a long way in October, up about 6% as measured by the S&P 500. I believe a little sideways action sets us up for a better break to new highs in the near future. We fell hard toward the end of Spetember and quickly reversed upward. It is going to take a surprising piece of negative news to really break this market.
My intermediate to long-term outlook is much les ssanguine but as they say for now "the trend is your friend."