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The Prudent Course

November 20, 2009 – 11:48 am

The market is struggling, telling us that the strong move up since the March 9th low is over, but further gains are likely just with much less gusto. There is a lot of built in momentum in stock prices and that momentum can turn down quickly without continued good news on the economy.

The next earnings season won’t start until January though there will be a few companies reporting their numbers before then. Investors are going to be closely watching the holiday season because for the sales to push stocks higher there will have to be top line growth in sales. Profits last earnings season beat most expectations but that was based on cost cutting not sales growth.

If the top line does not start to improve the end of the rally is at hand. With the recent retail sales report and other hints on the economy we should see some growth but it is likely to be muted.

What the stock market will do with that information is unkown but until we see a change of trend it is more prudent to stay invested. However, it may be a good time to be defensive..

Good Trading
Steve Peasley

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