The intraday SPY prices for the last two days have overlapped with SPY’s March 9th and 10th 2004 values.
Since March 9th, 2009 the SPY values exactly 6 years apart have matched each other within 15 points all the time and on average have closed within 4.5 points of each other. While the calendar synchronicity is surprising, it isn’t surprising that the recoveries after two big crashes have looked similar–a huge recovery rally, followed by some sideways action. The volatility of the 2010 sideways action has already been 2X what we experienced in 2004, so I think it is fair to predict a wider trading range moving forward. The big question though, is whether we stay in a similar, albeit wider, trading range, or will we breakout one direction or the other.
As usual the doomsayers and boomsayers are present in roughly equal parts. The state of the commercial real estate market looks grim, but it doesn’t have the feel of the general destabilization that accompanied the personal real estate crash. Small and medium banks, not too big to fail, seem to have most of the exposure–when they fail it isn’t as scary. And when a commercial property owner does default on their loans the leasers don’t disappear, their choices stay about the same. A large local shopping complex recently into default and reverted to the original sellers. The defaulters were out their interest, the sellers got their property back, and the shoppers kept shopping–hardly a nightmare scenario. Stock valuations look high, but they usual do at this point in a recovery, because profits have not fully recovered.
High unemployment will dampen consumer spending and governments will continue feeling the pain from expanding their spending and benefits to the max during the boom times, only to discover that it is harder to cut than to add.
I’m betting on sideways.