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 8-04-2009
The market managed gains on all the major indexes, Monday. As I indicated in yesterday’s commentary, I did take some profits.
The market is rallying on regrets, the regret of missing profits. Most people, and professional traders, have been on the outside of this rally. The average person is only invested 40%-50% in stocks, and has money sitting in CD’s or money markets at 2%-3%. They will wait until they cannot stand it any more, and then jump in and buy stocks at any price. The market makers call this “mood swing”, or “ringing the bell”. The rational for buying is called “The Greater Fool Theory”. You buy a stock, hoping there is a bigger fool that will buy it from you at a higher price.
The market is a poker game right now. It is going up on two assumptions. The first is the worst is over, (maybe), and the second is that earnings will grow at the same rate we had in 2006-2007, when housing values were growing at 8%+, and job security was never a consideration. If these assumptions fail to occur, the next move will be down, violently.
The biggest rallies occur during bear markets. This is when people buy stocks because they are going up, and before the economy has demonstrated the end of the recession. Right now, the economic numbers are still showing the economy is continuing to run out of gas, just not as fast as it was during the first half of the year.
You have to be in the market to make money. Just understand this rally is long in the tooth, so know your exit. Unless you are ready to go back to “buy and hold”, be happy taking small gains, and understand that if you have been in the market for more than a year you have lost money.
The upside target is 1042 for the S&P, and 9450 on the DOW. The NASDAQ target is 2150. All these numbers still indicate a downtrend.
The market calendar has employment numbers on Wednesday and Friday, which could kill the current rally, so again know your exit.
Return to Previous Market Commentaries