Calm Week Of Stock Equity Market At Inflexion Point

Both daily trading range and volume shrink in this week. Market participants are hesitating to trade in a market without direction. Some institutional investors attempt to sell down the market but there are not many followers. Investors with holdings and unrealized profit are afraid that stocks sold at current price cannot be bought back at a lower price. Investors with cash on the sideline are waiting for the ideal entry point. But it appears that the majority of market participants anticipate an immediate correction at current peak level. The majority of sellers are traders and individual investors liquidating only a small portion of their portfolio.

On the other hand, there is ample supply of capital in the financial market. Concentration of wealth and the wealth creation effect of stock equity appreciation make investors hungry for yield. The majority of individual investors continue to flee the stock equity market and go into the bond market. As mentioned in the Yahoo! article "First-Ever TIPS Auction at Negative Yield: What It Means", the offering of $10 billion in Treasury Inflation Protected Securities (known as TIPS) was priced to yield an interest rate of -.55 percent. In another Yahoo! article "Cotton, coffee and sugar all rally to end week", commodities are back to recent high level.

Although market sentiment on economic growth is bleak, especially on unemployment rate, assets price are driven by wealth allocation which is mostly held by household. Therefore stock equity and real estate become unpopular after the financial crisis. However, institutional investors are benefited from the rally of stock equity.

From Yahoo! article "For Many Market Strategists, Equities Are Top Dog Again", asset allocation strategists haven't had an easy time in recent years. They've grappled with deflation, recession, plummeting U.S. stock markets and surging foreign economies. And for awhile they dished out bigger weightings to defensive plays-bonds, cash and commodities.

But in 2011, strategists expect the stock market to notch double-digit gains and recommend investors boost allocations to ride the wave, whether its lower-risk consumer staples stocks or global companies tapping into emerging market supply needs.

"The S&P 500 is growing its earnings," says Joe Zidle, head of global wealth management investment strategy at Bank of America Merrill Lynch. "And we think that stocks are undervalued relative to historic price-to-earnings ratios."

Market is waiting for trigger signal for the next move. Probability of an imminent market correction exists. Short term speculative traders can use swing trade strategy to make profit from market movement. In the long run, stock equity will catch up with other wealth assets.