We are now in a wolf market which is characterized by a tight trading range, increased volatility, high stock correlations and quick reversal. It make it hard to pick stocks based on fundamental qualities, leaving shorter-term options and technical analysis better tools for navigating its bounces.
In the rally from the March 2008 lows, investors priced in expectations of a faster recovery than has yet materialized. The market has struggled to find direction, balancing the drag from the late spring European sovereign-debt crisis and the recent slew of lackluster economic data with the more encouraging second-quarter earnings. That has left trading trapped in a tight range, subject to sharp ups and downs.
The wolf market may be here to stay, at least until the economic recovery accelerates or another catalyst prompts the market to find footing. It seems the wolf market will last into 2011.
It make better sense to bet on a murky market for shorter-term profit.
