The wild gyrations in the market have many investors (particularly energy investors) very nervous. This is typical market action in October since the 2005 fiscal year ends for many mutual funds and institutions on October 31st.
I know, I know, you're probably saying "do I have to go through another week of this stuff?". Not necessarily. As early as tomorrow, and into next week many of these mutual funds will have finished taking profits and booking losses for the year. Once this has taken place, these institutions will begin reallocating funds back into the stock market.
The mood among investors is clearly bearish. According to last weeks AAII investors survey, the number of bulls have fallen to 38.9% from 50%, and the number of bears have increased to 48% from 27.5%.
With the market averages in negative territory for the year, and the "bear killer" month ready to end, the market averages could overcome this negative sentiment soon and carry the indexes up 9% from current levels into year-end.
Given the deeply oversold condition of the market, and the possible euphoria over falling energy prices, it is not impossible for the market to rise 15% or so into early 2006.
The targets we will be focusing on are as follows:
S&P 500: 1250-1350
Dow Jones: 11,000-11,500
NASDAQ Comp: 2200-2350
Stay Tuned
