Archive for the ‘Hope’ Category
Tuesday, February 16th, 2010
With this being a holiday week and with little economic data out this morning the market decided to push stock prices higher. It may be caused by nothing ‘bad’ happening over the long weekend in the world. Maybe traders feel the correction phase of the market is coming to an end though the indexes only fell about 7% which is light for a correction. Of course all we have had are light corrections since the rally began last year.
Greece is still a problem as the rest of the EU talks about a bailout without calling it a bailout. Greece itself seems to be walking around like a zombie telling anyone who will listen that they have no problem.
There are many issues that could upset the worldwide recovery as China deals with a budding inflation problem. So far they have tightened their money supply twice this year to hold down inflation.
Despite these headwinds there is a rather large tail wind for our economy. Only about a third of the stimulus package passed last year has been spent. As a result, this year and next will see massive spending in our country and at a time where economic stats are showing us the beginnings of a recovery already. That spending is a major push and should support continued growth.
Will that push stock prices higher? Earnings and growth are the key. The chances are good that both will do well this year.
Good Trading
Steve Peasley
Posted in Current News, Financial Outlook, GDP, Hope, Uncategorized, inflation, mutual funds, recession, stimulus package | No Comments »
Tuesday, May 12th, 2009
The week started on an up note. The stock market got a boost from the existing housing sales report which showed sales up 3% nationwide with a more than 8% increase in the west. Also on Monday a report on China’s economy showed its manufacturing sector growing much stronger than expected. That led the market higher and set a tone indicating our economy will eventually recover.
By mid week, after a couple good days, we had a sell off on Thursday which was broad based and painful. However, this morning with the bank stress test and an employment report for April behind us without any surprises the market decided to rally again, at least so far this morning. This is an obvious case of the market climbing a wall of worry.
The economic numbers actually were very encouraging this week. Retail sales were up for April by .3% and for last week up .7%, but what was more surprising was the first time jobless claims which fell by 34,000 this week and the four week average fell as well by 14,759. True jobless claims sit at over 600,000 which are very high but the stock market cares about the trend and is looking for the beginning of the change. That seems to be happening. Can this change turn into actual growth? At some point it will but not for a number of months, maybe by the fourth quarter this year or next. At some point the worry will turn to the strength of the recovery but so far no one is talking about that, yet!
We have had several weeks in which economic numbers, though still showing us that the U.S. economy is in a recession, seem to point to a turn from free falling to just falling or leveling off. The just ended earnings season came in better than expectations. Of course those expectations were severely downgraded at the beginning of the year therefore beating them is not all that difficult. The real test will be the sustainability of improving numbers. Can that happen?
I believe it will. The LIBOR rate is now below 1% when a few months ago it was as high at 5%. That is the rate banks lend to each other. The mortgage rates are at 5% or less and this week we saw productivity increase by .8%. Add these stats to all the others these last few weeks and we have strong evidence that things will get better. Finally, China, who embarked on their own stimulus plan, is already showing signs of strengthening growth despite the slow down in exports. The guidance, by independent firms, is calling for an increase in China’s GDP from 6% growth to 8% this year.
Does this mean the stock market is going to rally straight up from the March 9th low? Probably not. We will have corrections along the way. Any correction will be one to buy not sell. At the same time taking profits every so often is not a bad thing. Since China is already recovering and growing we have increased our exposure to the Asian market. You need to go where the growth is and since the stock markets of the Far East fell a lot harder than ours it has made all of Asia a good place to invest, despite the risks of lack of transparency and multiple books that their companies keep.
It is time to invest and has been for several weeks. No one knows when and where the bottom is but we can look back and clearly see a strong bottom of the various markets that took place on March 9th. Put fear aside and let’s make some money.
Posted in Currency, Current News, Financial Outlook, Hope, Industry Analysis, banks, housing, jobs, recession, stimulus package, stock market | No Comments »
Tuesday, April 21st, 2009
The market this morning decided to give back some of its recent gains. This certainly should have been expected and it’s a question of how much will the market retract? Actually, a pullback will be a healthy sign that we have reached the bottom set in early March and that the market with the economy has a brighter future for the rest of the year.
The large merger deals announced by Pepsi and Oracle and a great earnings report by Eli Lilly Company did nothing to help the market. Also, Bank of America announced surprisingly good earnings this morning though the bank stated credit defaults were still rising. None of that good news mattered.
The stock market reaction today is a clear sign that it is ready for a pullback. It could be short and sharp, but it should only be a pullback and one that should be bought not sold. Having cash on the sidelines waiting for it to finish its pullback, and having a hedge against this fall has ‘not’ been a benefit in the recent rise, but the market will now give you an opportunity to enter the market at better prices and exit your short positions.
It would be prudent to wait a few days to let the market work.
Good Trading
Steve Peasley
Posted in Currency, Current News, Foreclosures, GDP, Hope, Important, Industry Analysis, Uncategorized, banks, commodities, jobs, recession, stimulus package, stock market | No Comments »
Monday, April 13th, 2009
Earnings reports for the first quarter picked up speed this week with the first big blue chip company Alcoa reporting poor numbers after hours on Tuesday and Wells Fargo reporting surprising record profits this morning. The market sold off Monday and Tuesday in anticipation of a tough earnings season but Alcoa, with its bad numbers, held up well on Wednesday because those bad numbers were expected. Some analysts actually upgraded Alcoa based on future numbers. The phenomenon of bad numbers or bad news not affecting the market or individual stocks is well documented. It is simple to understand but difficult to anticipate. When investors expect something in the future they price it in today. So bad earnings for the first quarter has been expected and thus if we get them it should not affect the market. Of course there is a large exception to this quirk of the market and that is if the earnings come in worse or better than expected. The devil is always in the details; Alcoa’s bad numbers were expected so the stock did not fall, but Wells Fargo’s good earnings were not expected so it went up sharply with the entire market this morning.
So what can you do about the daily gyrations of the market and individual stocks? Take a bigger picture perspective. Is the economy at its worst? When will the economy find its feet? When will the housing market start to improve? What is happening in interest rates, inflation, deflation and the money supply? After stepping back, your conclusion should be that we are in a very deep economic hole. It is deeper than most others and stock prices have collapsed over the past year.
The market expected this deep hole and it appears it is now expecting some kind of recovery. Always, stock prices lead the economy both down and up. It appears we need to be buying stocks not selling them. The market is one of the strongest leading economic indicators we have.
However, don’t expect the market just to move in one direction. We had a very steep downturn for the first two and half months of the year after a very bad 2008. Then we have had a steep rise in three weeks. Both moves were too violent to be sustainable. Expect a pullback of the recent rise. That pullback should give you an opportunity to exit any short positions and start to add long positions. Use any weakness. We had it this week.
It is time to be buying! The bottom is in and will hold. Retesting may happen but my guess, and it is a guess, is that a retest of the recent bottom will only be a half hearted effort, maybe retracing 50% from this steep up move. Resistance on the up side is at 8,000 on the DOW and 800 on the S&P 500. It looks like it is being broken to the up side. The charts are fairly clear about this resistance and this week has shown us that the market will struggle in this area. It struggles in this area because, we the investors and traders, see it on the charts and make it happen by our reactions. Charting is nothing more than watching human nature at work.
Still it is time to buy on any weakness. The market is on sale. It has been rare that it has been this inexpensive. Are you going to wait too long and be one of the last ones to enter, thus missing the upside? If you are in, stay in. If you are out, buy. We will be buying. We have been doing so very slowly waiting for some weakness to be more aggressive. We will exit the last of our short positions and buy more aggressively if we get the expected pullback. Earnings season is going to make it interesting which is another word for difficult. Don’t let fear paralyze you.
There is an old saying, “the market crawls up a wall of worry”. Are you worried? If you are, buy. Just don’t be too aggressive!
Good Trading,
Steve Peasley
Posted in Currency, Current News, Financial Outlook, Foreclosures, Hope, Industry Analysis, banks, commodities, inflation, jobs, recession, stock market | No Comments »
Friday, April 10th, 2009
Our government, the banks and the Fed all have told us that if we didn’t spend billions if not trillions of dollars our entire economy will collapse.
It certainly seems that the rhetoric was not only over done but orchestrated to convince the public to support the massive spending. I am not a conspiracy theorist but it feels like the press, the politicians and the banking corporations oversold the dire news.
Was it bad and is it still a problem? Yes! Do we need to spend the huge amounts of money to save all the different companies we are saving? Probably not.
Be that as it may, Wells Fargo’s news was very pleasant, putting an underlying support level for stocks and providing a little faith in a free market economy. This is also a lesson that we should not believe everything we hear.
Good Trading
Steve Peasley
Posted in Hope, Important, Industry Analysis, banks, recession, stimulus package, stock market | No Comments »
