The S&P 500 finished the week with a modest gain of about 0.60% but, the path it took to achieve that victory was quite dramatic.
The week started with an abrupt drop of around 1.7%, as the recent corrective action gained traction. The drop was attributed to the inability of Chinese property developer Evergrande (EGRNF) to pay its debt. It is likely that the market was simply looking for a good excuse to accelerate the corrective process, and Evergrande hit at the right time.
Stocks bounced back late in the day Monday, inched up further on Tuesday, and then the "V"-shaped bounce picked up steam on Wednesday and Thursday. The week ended with some mixed action as stocks consolidated gains and market players look ahead to the end of the third quarter next week.
While the "V"-shaped bounce following a couple of weeks of corrective action is quite bullish, what I found most positive about the market action was the interest the retail investors exhibited. The little guy is looking for action, and it is staying upbeat about stock picking, despite the macro issues that the talking heads keep warning us about.
There are plenty of people who want to buy stocks. They still have buying power, and the action isn't so frothy and frenzied to raise concern. I expect to see continued efforts in the last two weeks to position for some good earnings news in mid-October.
This market does present some challenges, but the way the recent corrective action has played out is quite positive and gives us a foundation for better action as negative seasonality comes to an end.
Have a good evening. I'll see you on Monday.