Bad News Is Good News, For Now

The U.S. economy just went through its biggest decline since 2001, according to today’s quarterly Gross Domestic Product report from the Commerce Department. GDP by 0.3% in the third quarter, which doesn’t sound so bad but is probably understated. Nonetheless, analysts were expecting the report to be even worse, so stocks reacted with another nice rally.

For the past few weeks, every bit of economic news has been given the worst possible interpretation. Even good news was bad news. Bad news was really bad news. Today’s bad news turned out to be good news, a fact which is itself good news. (Dizzy yet?) My point is that this week we’re seeing signs of optimism in the markets. Yes, it is slow and inconsistent, but it looks like the fog might be lifting soon.

In fact, don’t look now but there may actually be an uptrend in the house. Today the S&P 500 closed above its 20-day moving average for the first time since September 19th. This means the market is, by one widely accepted technical definition, in a short-term uptrend. It’s not much, and it might not last very long. But as of now, those are the facts.

In no way do I mean to imply we are out of the woods. Any number of things could push the market right back down to new lows. I’m suggesting that there might be the first, tentative signs of potential upside. This could change tomorrow. One thing will definitely change tomorrow: the dreaded month of October will be over. And that’s good news.

photo credit: pinkiwinkitinki