I don't mind predictability. I like living a drama free life. Maybe cause I am a relatively boring guy. But the market hates boring. The market will rip the face off of predictability. The only thing we do not know is 'when' Mrs. Market will get her nails ready. Like any vixen, she leaves us her clues with out telling us exactly what she wants.
We saw a nice move, but ultimately 1180 provided resistance. However, I believe the markets are forming an interesting foundation here. Below are her whispers:
1. Individual stocks are leading the way. The most obvious is AAPL and IBM. AAPL already hit its all time high when the SP500 was testing its recent low. IBM saw higher lows as the market declined, and higher highs as the market bounced. (IBM is near its all time high.)
IBM and AAPL are not alone. There is similar strength in other names as well. But this is just from the technicals. Fundamentally, we are getting confirmation that business activity did not fall off a cliff, and is actually doing 'okay'. Oracle gave us the first of such indications. Today, Accenture and Paychex are confirming the business activity.
2. Related to #1, the semis are seeing higher lows with the market weakness, as the index broke from its negative trend.
3. The 10yr yield has pushed higher, and seems to want to breach from its down-trend. IMO, this is very good for equities. Relatively higher yields suggests higher growth rates. But the yield has ways to go before it signals to the big-boys 'all is clear'. (Its got to get above 3%.)
All-and-all, there is a foundation building here.
I know the flip-side to this argument would be to look at the commodity complex or copper to highlight the economic weakness that is not yet suggested in corporate numbers. But I hesitate when I hear this argument because each market is its own supply/demand issue. If China is going to slow down construction then copper is going to take a bigger hit. This does not mean China will allow their economy to grow below 7-8%. (Have investors completely forgotten that China was been stock piling Copper earlier this year?)
Another example is agriculture. Current crop yields have been good, leading to an ease in pricing. The supply side of the equation over came the demand for this season. However general demand is still very much intact. Inventories are still at very very low levels. (Supply side price decline in food is a good thing for the economy.)
Lets not forget the jump in the dollar, and how it shocked the commodities market. That exaggerated the moves.
IMO, the commodity argument is corrupted by specific internals of their own markets, and the spike in the dollar. (The dollar rise will play less of a roll once the appreciation of the dollar becomes normalized.)
All other negative arguments are "what ifs". For every negative "what if", I can produce a positive. (So I will just keep the "what ifs" in the back of my mind until I begin to see some legitimacy in anyone of them.)