Market Showing Volatility.. Is "Goldilocks" Back???

chart courtesy of www.realtimestockquotes.com

The Dow Jones Industrial Average finished Friday's trading session up 208+ points. All markets rallied on the positive jobs number.. all markets except commodities. Investors are interpreting this and other economic data to mean that the U.S. economy is healthy and is "the only game in town" when compared to the weakness everywhere else in the world. Investors are trying to take advantage of the safe haven that the U.S. markets provide. Media experts were starting to use the word "Goldilocks" economy, once again, a term which was used quite a lot in the 1990's. Goldilocks implies an economy that is "not-to-cold, not-to-hot, but just right." And gold is being declared dead.

Prior to Friday's session we saw large amounts of selling. This followed the recent "pop" to new market highs immediately prior to options expiration a week earlier. It seems probable the market's new high was due to options traders and specialists not wanting to be on the wrong side of the trade once the market finally did start to decline. The following week is when we started to see the pullback to the 50 day moving average.

The above chart shows there is still room for pullback. The Dow has not hit its 200 day moving average since about 2012. Therefore, it seems this would be a healthy stopping point for any further selling. The U.S. markets continue to be the best place to put assets at this time. Many Dow stocks are paying well above a 2% dividend and they are more financially sound than most banks. Any significant selling is still a good buying opportunity. This volatility could continue through the first quarter of 2015 as the market tries to sort out if-and-when the Fed will raise interest rates. Conversely, the lower interest rates go the further bank margins are squeezed. A strong dollar can also mean trouble for the multinationals who will be reporting earnings soon. But for now, the market prefers to entertain the "Goldilocks" idea. Until something changes the market party continues.

Note: The above is for informational purposes only. Any decision to buy, sell, or hold any specific asset for a portfolio should be reviewed by your portfolio manager.