All-In, Or Sell The Bounce?
Good day members,
I’m sure that by now you’ve noticed the new format of our newsletter. Rather than send you the newsletter twice a week via email, we’ll be posting a monthly version here on the site (you will still be receiving special alerts via email, however). So remember to periodically check to see when the new posts are made.
With that in mind, let’s have a quick review of our last newsletter and discuss where we think the market is headed now.
Last time, the S&P was under attack. The index had fallen precipitously low near bear market territory… Here’s what we said
Either support collapses and we tumble to the mid 1,700’s (representing an additional 5% drop from here and an 18% drop from all time highs) or we find that floor and begin running up. If we do fall, the next support level brings us into bear territory.
But as with previous selloffs, the rebound is quick and sharp. We do feel the floor will be in at 1,820 so going long the index after a confirmed run up (maybe to 1,880) could offer great returns in the short term.
The big “if” in the market right now is oil. Is crude collapsing because of a glut of supply or is demand just that shoddy? If it is indeed a supply side issue, the market will strongly rebound on consumer spending and sentiment… however if it is a demand side problem, indications are we could be in for another global recession… so look out below.
We feel the fundamentals of the economy, although lackluster, are strong enough to avoid catastrophe, so keep your eyes on that 1,820 level. The streets are flowing with blood and this may be the time to get out the mop and soak it up.
Well, mark that one down as a correct prediction. The market had indeed bounced off that 1,820ish level and moved higher, over 120 points higher in fact. So where does that leave us? Are the good times about to roll again or is this just a dead cat bounce?
I say neither. With the global economy in the proverbial dumps, the world turns to the USA for gains. So there lies the double edged sword… or catch 22, if you will. The global economy is looking bearish, yet global investors are likely to buy US stocks, helping prop up our markets.
With our economy nowhere near the robustness it needs for substantial, sustainable growth, and foreign economies already flat or negative, the overall outlook is indeed bearish. Until the global economic engine called America kicks into full gear, we will not be in a prolonged bull market again. And unless we fall into recession, we will not be in a prolonged bear market…
To put it simple, welcome to the Stock Pickers Market! We remain in the same position as last month; it is neither a buyer’s nor seller’s market. Gains will come on individual stocks, however. Be prepared for more of the same up and down market.
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