Thursday, April 14, 2011 9:16 am EDT
Nasdaq Comp.: 2761.52
Russell 2000: 823.92
Game on. We now have two proposals for addressing the our nation’s cumulative deficits and it is time for a rational compromise, without riders and ideological issues complicating the decision. This is about us, not them.
We dodged a bullet in 2007 – early 2009, but need to keep the momentum rolling. Addressing our debt issue is crucial. How that is done has a bearing on confidence which is a major contributor to our economy and investment markets.
Today: Look for a lower open. Yesterday I noted that a rally failure would suggest more downside, and that is what is happening. Adding to the downside at the open is a jump of 27,000 in Jobless Claims, though that is not the big issue.
I think the market is nervous about Q1 earnings and perhaps earnings for the remainder of 2011. Guidance and projections may have to be revised. That in itself would be a damper on enthusiasm, causing the market to find a new comfort level. It wouldn’t take major revisions to produce a stall.
Bottom line: We are probably looking at a sideways trading range throughout the summer until fall. This would fall in line with the “Best Six Months of the Year” for investing (Nov.1 to May 1). Worth noting, the current six months started at the beginning of September last year , two months ahead of schedule. It also coincides with the bromide, “Sell in May and Go Away.” Isn’t that a cute one ? – ugh.
The Best Six Months and Sell in May seasonal patterns have impressive records for accurately forecasting trends in stock prices. The Stock Trader’s Almanac pioneered this research and follows up at http:/blog.stocktradersalmanac.com.
Most of the BIG money and institutional investors look ahead to what they expect the economy and their targeted stocks will be doing a year or more from now. That’s why they were buying 18 months ago. They correctly projected today’s improved conditions.
So far, they like what they see a year out.
I think we have to be alert to a plunge in commodity prices. While I have written about them and interviewed key players, it is not an area where I feel comfortable making projections. They can be highly volatile, though and have had a big run.
My point here is, a plunge in commodities would cool the fears of commodity driven inflation, one of the concerns plaguing the stock and bond markets going forward. Wouldn’t it be nice to get two negatives off the table over the next three to six months – addressing the nation’s debt spiral and reducing the fear of inflation.
George Brooks, firstname.lastname@example.org
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