Market Health Update--12/16/2014

 

I talk a lot in my research reports and discussions with clients about the dangers of a complacent market.  Frankly, we are seeing a great example of a healthy and NOT complacent market right now.  Oil prices have fallen significantly, this will certainly have some positive impacts on specific segments of the market.  BUT, it will also have some profound negative ones as well.  A complacent market would ignore the potential bad news and march on with a continued Santa Claus rally.  However, our current market is reacting in a highly appropriate manner to the uncertainly surrounding these falling commodity prices.  What this does is lessen the market impact of continuing bad news, as prices have already pulled back.  AND it brings to the table major upside potential if the bad news is addressed, as the market would have to make up all these short-term losses just to get back to where it was previously...and this would make for a nice pop before any real gains even started to accrue.

Anyway, this current market is demonstrating a great example of how a healthy market should be reacting.