Today’s Stocks & Topics: 401(k), Car Companies & Money, (ORI) Old Republic International Corp., (VLO) Valero Energy Corp., Taxes, (URE) ProShares Ultra Real Estate, (YRCW) YRC Worldwide Inc.
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The market is under pressure again. We appear to be in the correction that most market watchers expected. The fall in stock prices could be simply the fulfillment of the expectations by a lot of market experts. If they expect a pullback they sell and make it happen.
This pullback is just that, a pullback. The indexes are not likely to go back to their year lows. There are too many ‘green shoots’ that appear to be indicating a slow recovery in the economy. This weakness may be as much as 10%. That is an opportunity to buy if it happens.
Yesterday a small ‘green shoot’ was a report about housing. Sales rose 2.4% in May for the second month in a row. Inventory of unsold homes was down 3.5% to 9.6 month supply and prices were down .1%. Make no mistake. These are not good numbers but they are improving numbers. With foreclosures putting excess supply in the market housing is going to remain weak for a long time. However, it appears to be stabilizing for the low priced properties. Inventory numbers are key and they have been slowly improving. The unknown is how much more pressure will foreclosures impact inventory? Can low interest rates and falling prices continue to absorb inventory? The answer is yes with a caveat. How low will prices go and how long can rates stay as low as they are? It appears that housing is starting the long slow process of stabilizing.
Good Trading
Steve Peasley
Today’s Stocks & Topics: (V) Visa Inc., (UNG) United States Natural Gas ETF, (GDX) Market Vectors Gold Miners ETF, Gold, (MTXX) Matrixx Initiatives Inc., Natural Gas.
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Today’s Stocks & Topics: 401(k), Commodities, (C) Citigroup Inc., (MNKD) MannKind Corp., Energy, Reverse Mortgage, Zero Coupon Bonds.
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We have had several weeks where the market appears to be pausing with a slight bias to the down side. The market looks tired after its sharp move up from the bottom.
The Bulls say that this is a health restoring event, or consolidation period, and they would be fine with a 10% pullback. They also would argue that the lower prices could attract into the market those who sat on the sidelines during the rally.
The Bears argue that it was a rally that was underserved, that the sharp rise in prices was too fast because the economy is still far too weak to justify higher prices and that earnings are not going to rebound enough to support higher stock prices. They suggest that it was a short covering rally only.
So which side is correct? Everyone knows the widespread weakness in the economy. Will the huge amount of stimulus work? Will China’s growing economy help pull up world demand for goods? Will the banks continue to improve their balance sheets thus be willing to begin loaning again? Will interest rates stay low enough to keep the small housing recovery on track?
These are all good questions that are very difficult to answer. I believe the bulls have the edge in the argument, but just an edge not a conviction. Expect summer weakness. Expect a pullback and expect a rally. Of course the timing is going to be difficult.
Good Trading
Steve Peasley
