What goes up, down, then winds up the same? Stocks

June 14, 2010 at 12:00a.m.

Associated Press

NEW YORK

The stock market has been swinging wildly but going nowhere.

The dramatic ups-and-downs are reminders of the frightening slides of late 2008 and early 2009. Despite the big moves, however, the market hasn’t really ended up far from where it was three weeks ago. That’s a signal that things aren’t as bad as they were during the depths of the financial crisis.

Sure, there are big questions about whether the U.S. economy can scrape by with high unemployment and a possible slowdown in Europe. But for all the fear, the market has been more like a car revving its engine in neutral. That means stocks could be priming for a turn higher.

A look at the closing prices of stocks since late May shows how little the market has moved overall. On May 21, the Standard & Poor’s 500 index finished just below 1,088. On Friday, the S&P closed at 1,092. That’s a difference of just 0.4 percent. Going back even further, to one of 2010’s low points on Feb. 8, the S&P 500 index ended near 1,057. It’s only up 3.3 percent since then.

There have been many huge swings since the market’s peak in April but thankfully for most investors they all haven’t been down. If all the moves in the past 16 days had been losses, stocks would be down 26 percent. Instead, because of all the zigzagging, the S&P 500 index is down only 2.1 percent.

So what does it all mean?

Some analysts say the frequent shifts are a sign that the market is closer to getting back in balance after the S&P 500 index fell 13.7 percent from its 2010 peak on April 23 until its low of the year on June 7. It’s important to remember that it can take time for the market to find its bottom. That means there could be more selling.

“It could go down another 10 percent or so,” said John Apruzzese, partner and equity portfolio manager at Evercore Wealth Management in New York. “We had one of the most dramatic drops in investor sentiment that we’ve ever experienced.”

Apruzzese and other analysts note that the big drops in confidence drive away investors and can also make the market prone to a surprise climb. When investors give up, savvy traders often see that as a sign to step in.

It’s a given among many professional money managers that everyday investors usually pull out of the market at exactly the wrong time. That signals for the smart money that it’s time to move in.