Stock Market
All comments and Stock Market Ananlysis are made by Guy Brumley. Guy has been trading the Stock Market daily since 1992.
Trading, evaluating stock prices and predictions
Stock Market Commentary 6-15-2009
The DOW managed to close up 28 points Friday, on the lowest volume since last December. Like we do not recognize that it is summer, and the big boys are taking 3-day weekends. The volume was heaviest in the first couple of hours, when the indexes were down, and then drifted lower the balance of the day. This is also when the DOW and S&P went positive.
The DOW is now positive for the year. The investment advisors bull-bear ratio listed in the IBD, has the number of advisors who are bullish at a one-year high, and the number of advisors who are bearish at a one-year low. These are the levels seen in bull markets. The problem with calling this a bull market, is we need earnings to return and appear to have the ability to increase You can feel the optimism breathing back into the market, and people starting to count their gains. Do not get too excited.
Nobody knows where the market is going. With the DOW at 8800, the 9000 level is the next stop. The next trend line resistance is at 9200. Any of these numbers can be reached in a single day. With next week being option expirations, I would not be surprised to see a big move down on Monday or Tuesday, then a big move up on Wednesday. Then most of the volume coming on Thursday, with the closing of options on Friday being active the first hour and a half and then down the rest of the day.
This leads into the debate about the market, whether buy and hold is back, or dead.
I think buy and hold is dead, because earnings are going to struggle in the next few years. With oil prices and interest rates rising, there will be strong head winds to fight earnings. The market will not be the cash machine like it was in the 90’s. Similarly home prices have come down, and the second income from home equity loans will have to wait until the original mortgage is covered. The free cash to run up stock prices will be scarce.
The new market will require proper stock selection, and defensive trading rules to preserve capital. The new high list will be the first place to find these. Watch FUQI for a buy point at 13.
Other stocks to watch this week, BIDU for an up move using options, and AZO
to go further down if it closes under 155.
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