Assessing The Recent Stock Market Damage [McDonald's Corporation, Utilities SPDR (ETF), iShares MSCI Japan Index (ETF), iShares MSCI EAFE Index Fund (ETF)] - Seeking Alpha

Assessing The Recent Stock Market Damage [McDonald's Corporation, Utilities SPDR (ETF), iShares MSCI Japan Index (ETF), iShares MSCI EAFE Index Fund (ETF)] - Seeking Alpha



Eric Parnell has written a very good article about why the recent stock market decline is most likely just a correction.  He mentioned that the S&P 500 bounced off the 150-day moving average line when we had our 6% correction earlier this year in January to the first part of February.  So, if the S&P falls to 1793, that could be the turn-around point for stocks.



Eric also mentioned that LQD, the corporate bond ETF, is doing just fine.  If we were headed for a bear market, it would be dropping along with the rest of the stock market.  The credit markets are okay.  PFF, the preferred stocks ETF, is also doing well.  XLU, the utilities ETF, is also showing no signs of stress.  An all-out bear market would send XLU down with most other stocks.



Another point that Eric made was that VIX, the volatility index, was behaving normally.  Highs of recent years are only around 21, and we are currently in the 16 range.  If perchance VIX goes above 18, it might keep going to 21 while the S&P 500 moving average might break its 200-day line.  This would probably signal a reversal, though, because the economy is nowhere near a bear market scenario.