On a daily basis, we are bombarded with headlines from the mainstream media. Whether its problems in the Euro-Zone, the collapse of MF Global, persistent unemployment, "stagflation" or the nation's enormous amount of debt, there is plenty of negative sentiment out there.

What does the market say about all of this? Price pays after all, not opinion. Below is a chart of the SPY's. It is the most popular ETF (exchange-traded fund) that tracks the S&P 500. As you can see, the market suffered a sharp sell-off in July-August of this year. Since then, however, we have been making higher lows and lower highs. Volatility has been contracting slowly over the last few months, and you can see price squeezing tighter within the trend-lines I have added to the chart.

What does this mean? It means that soon the market must make up its mind and pick a direction. Do we head back towards 52-week highs or off the edge of a cliff? I lean towards a market rally into the New Year, but I'm not betting the farm on it. As always, patience will be a virtue heading into 2012.

 

Sam DiNorma

 

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).