Friday, April 8, 2011 9:24 am EDT
Nasdaq Comp.: 2796.14
As noted yesterday, the market believes there will NOT be a shutdown in the government, as it persists in its upside bias, rebounding sharply Thursday from two sell offs.
Today: Rally at the open with a follow through dependent on mounting optimism (or not) of a deal out of Washington. Failure = 250 – 350 points down in the DJIA next week.
I think we can credit this month’s strength to the expectation of good Q1 earnings reports. I also think there will be some selling into those reports, especially in stocks that have had sharp 2011 run ups.
What does one do ?
Old readers here, know what I am about to say but for the benefit of new readers, let me suggest selling part of a position if you think there is a good chance of a stock going higher even though it has already had a big run.
It’s the same with being tormented about should you, or shouldn’t you, buy a stock. Why not take a partial position, then add to it when you are more sure you are right ?
I don’t see a bear market at this point. I do believe odds of a sharp correction are increasing. It would start as a 4% - 6% technical correction, but at the point where it would “technically” rebound, it gets clotheslined by unexpected news or commentary by someone with clout – the Fed, an economist, Wall Streeter, etc.
What was going to be a 5-percenter turns out to be a 9% - 12% correction during the summer.
The good news – potential for a juicy rally in Q4.
Will the Fed continue its stimulative stance beyond the end of its bond purchases in June ?
Opinions are mixed at the Fed, I don’t think they know one way or the other – YET. I think they are preparing to tighten the screws a bit, but still think commodity inflation is temporary
Remember - This is a “Pre-Presidential Election Year” – No losses in 72 years according to studies by the Stock Trader’s Almanac (STA). *
We are wrapping up a big run in the market that started in early September, two months ahead of the “Best Six Months” for investing (Nov.1 to May 1), also a study by the STA. Think and plan ahead, just in case !
*Stock Trader’s Almanac – MUST have ! Got my first in 1968. As a matter of disclosure – I am “compted” it as a journalist and former writer for Yale Hirsch’s “Smart Money” (not same Smart Money today) in the 1970s – 1980s. Also published now is the “Commodity Trader’s Almanac.”