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Index Gives Modest but Positive Signal

Index Gives Modest but Positive Signal

These days, any sign of an economic turnaround comes as welcome news.

The Standard & Poor’s 500 index has posted four straight winning weeks for the first time in more than a year in the week that ended Aug. 16. While that may not make bulls out of all the bears, it does offer some hope in what has been an extremely bleak economic year.

The S & P; reached a five-year low July 23, yet since then has gained 16.4 percent. One theory being advanced by analysts points to a more bullish outlook: investors are more reluctant to sell on any advances and will buy when the market drops.

They were also encouraged by the market’s positive reaction to the Fed’s recent warning of an economic slowdown. The next-day’s winning session was bolstered in part as CEOs began signing off on financial results, which passed with few surprises.

Other indexes used to gauge investor sentiment similarly offer positive trends. In fact, analysts point to July as the “grand capitulation,” signaling the end of the bear market that started in March 2000.

Still, it’s unlikely we’ll see a return to the salad days of the late 1990s anytime soon.

The Fed has warned it will cut interest rates again if a recession appears imminent, certainly not a signal the economy is rushing headlong into a bull market.

We may not have seen the last of the corporate scandals, and we live in a world where a terrorist attack is a daily and very real threat. Though such unknowns are now facts of life, they nonetheless leave a huge imprint on investor confidence.

September, which for the past 30 years has been the weakest month on average for all three major indexes, could plumb the depths of July 23’s five-year low.

But should the market continue its modest but positive upward trend through the fall, it offers a number of reasons to be confident about the economy heading into the all-important holiday season on an upbeat note.

, Rick Bell

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