In a decidedly undecided day stocks showed an impressive resolve to tread water. There is no question that this morning's New Home Sales data was bad, in fact as shown below it was the worst monthly report ever. By all rights the market should have sold off from 10:00 through the end of the day, obviously the Fed was a distraction, but a 18 months ago we all know how today would have ended. Instead the market bottomed shortly after the data was released and rallied back to peak after the Fed's comments.
This morning's market activity should be noted, it will most likely be clouded by the Fed and spun in a negative view by the press, but the turnaround was nonetheless impressive. For those of us watching closely, oil underwent a similar recovery. At 10:30 the August contracts were trading at $75.75 when inventory numbers were released. Crude inventories gained 2,017k barrels when analysts were expecting an 800k barrel decline; on a significantly higher increase in supplies oil bottomed and rallied back for most of the day.
There are two ways to interpret today's trading. First, that the market's collective wisdom is wrong and this is a selling opportunity. Second, that the market's collective wisdom is telling us that this is not a bear market. We are inclined to pursue the latter view.