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Posts Tagged ‘pullback’

NEW YORK: Wall Street will see the year-end rally carry into the last week of 2010 but the question on everyone’s mind is, “what’s next?”

Dow Jones, Standard & Poor’s (S&P) and the Nasdaq on Thursday were up more than 5% on the month and the level of optimism in the market was at a six-year high. The CBOE Volatility Index VIX, known as Wall Street’s fear gauge, was down by two-thirds from this year’s peak in May.

“I would think that the Santa Claus rally will continue into next week as there are still lots of mutual funds trying to beat or at least meet the performance of the S&P 500 within the calendar year of 2010,” said TD Ameritrade’s chief derivatives strategist, Joe Kinahan, based in Chicago. “The VIX is also telling us that the market is expecting low volatility, which would also support upside movement.”

Some contrarian analysts were more cautious as optimism at peak levels is usually a sign of a pullback and thus, negative for equities.

US stocks racked up a fourth straight week of gains on Thursday, as investors expected optimism about the economic recovery to support equities through year-end.

While many investors believe the fallout from the SEC’s fraud charges against Goldman Sachs (NYSE: GS) will be minimal, one billionaire investor sees it a little differently.

Legendary investor Jim Rogers told CNBC Saturday that, “Any market that goes up this much, this fast, this steadily without a correction – it’s not normal. When that sort of thing happens, the market could be setting itself up for a 15-20% correction.”

While Rogers does not think the Goldman issue itself will cause a correction, it may be the catalyst for selling.

Rogers was not surprised by the SEC’s actions, noting these kind of investigations usually take place after a major financial meltdown. Rogers said it is important to stay calm and not overreact to the situation.

He went on to add, “It’s not time to sell in any significant way.” However, he said investors should consider adding short to their portfolio and suggested investors short indexes.

Finally, as an avid commodities investor, Rogers said any pullback in gold is an opportunity to buy the yellow metal.

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Jim Rogers Thinks Goldman Case Could Be Catalyst For Correction (GS)