For months,
stocks have been rising. For almost as long, people have
been trying to figure out when the
market's rally would end. Last week's market action gave
those investors a wake-up call to restart their chant that
the end is near. But is there any reason to think that this
time will be any different from all the other false alarms
about a pullback that we've seen so far this year?
A scary time
If you own stocks, it's never fun to see a big drop in
the market. Memories of
month after month of falling marketsduring 2008 and
earlier this year remain fresh in your mind, and despite the
gains of the past eight months, the
mainstream economydoesn't appear to have shown much
improvement in many key areas, such as unemployment and
consumer confidence. The bankruptcy of
CIT over the weekend is just the latest sign
of uncertainty about where the economy is headed, as small
and medium-sized businesses struggle to find new sources of
financing.
In that light, last week's market action deserves some
attention. The S&P 500 lost more than 40 points, its
largest decline since May. Perhaps more telling, though, is
the fact that after repeating a common pattern in which the
market rebounded Thursday from its Wednesday plunge, stocks
again fell sharply on Friday. Whereas many prior one-day
drops had immediately rewarded those who bought on the dips,
the new pattern has some investors feeling
skittish.
Many investors have seen their portfolios recover a lot of
ground lately, but the last thing anyone wants to do is to
watch their paper profits go down the drain a second time.
Yet for many stocks, that's exactly what started
happening:
Stock
YTD Return
Change Last Week
Palm (Nasdaq: PALM)
278.2%
(22.2%)
Wynn Resorts (Nasdaq: WYNN)
28.3%
(13.2%)
Green Mountain Coffee
Roasters (Nasdaq: GMCR)
157.9%
(10.8%)
Dryships (Nasdaq: DRYS)
(43.3%)
(14.1%)
National Oilwell Varco (NYSE:
NOV)
67.7%
(12.6%)
MGM Mirage (NYSE: MGM) Continued... |