It was just a week ago that financial headlines bemoaned the market having suffered its worst week in 2 years. The bears came out of hiding with scary forecasts. Plunging oil prices, previously thought to be a positive for global economies, were suddenly seen as a major negative, along with the collapse of Russia’s economy and currency. Warnings of a potential global meltdown, perhaps even a 1998 style mini-crash, grew in number.
Bullish investor sentiment and confidence plunged. The weekly poll of its members by the American Association of Individual investors (AAII) fell to only 38.7% bullish.
The VIX Index, aka the Fear Index, spiked up into its fear zone again.
However, here we are just a week later, with the financial headlines celebrating the market’s biggest two-day gain in years (709 points by the Dow). Back is confidence of new highs for the year, and rising forecasts for 2015.
Yet, oil is still under $60 a barrel, and Russia’s problems have certainly not gone away.
It’s being said the rally is due to the Fed leaving language in its FOMC statement assuring it will be ‘patient’ in deciding when to begin raising interest rates. That is not a change, since markets were not expecting the Fed to act before next summer anyway.
[Check Out: The Burning Questions for 2015] It is difficult to determine market direction by analyzing surrounding conditions, even those as dramatic as the collapse of oil prices, or guessing what the Fed might be planning.
This post was published at FinancialSense on 12/19/2014.
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